The Morrison government’s election promise was to give first-home buyers a leg up with its First Home Loan Deposit Scheme.
The Scheme would allow first-home buyers to put up a 5 per cent deposit, rather than a 10 or 20 per cent deposit, but is it as good as it sounds?
The government already stated the Scheme would only be available for 10,000 eligible first-home buyers each year, but a new announcement places some further restrictions on the Scheme.
Also read: First home buyers await deposit scheme
Today, Housing Minister Michael Sukkar announced there would be price caps for the Scheme, based on median house prices per state as well as existing stamp duty exemptions.
The price cap for Sydney has been set at $700,000; $600,000 in Melbourne; and $475,000 in Brisbane. Price caps for large regional centres (Gold Coast, Newcastle and Geelong) are the same as those for the capital city in their state.
There's a flat limit for the ACT ($500,000) and the Northern Territory ($375,000), and areas with populations under 250,000 have a lower price cap.
Applicants must have earned less than $125,000 in the previous financial year as a single or $200,000 as a couple.
Minister Sukkar said only two of the four big banks will be chosen to take part in the Scheme, with 50 per cent of all guarantees set aside for smaller lenders. The participating big banks have yet to be announced.
Opposition Leader Anthony Albanese said with just two months to go until the Scheme is set to start, the government needs to announce more details.
"We still don't know which lenders will be involved and what the interest rates will be, and this is a scheme that is supposed to begin in two months," Albanese said.
Are you better off saving for a bigger deposit?
Domain research found that Aussies using the Scheme could actually be $53,000 worse off down the track due to the interest payments on a larger loan.
Those renting in pricey areas might be spending that $50,000 on rent anyway, so it could be a good idea to get in the market sooner.
Domain rental data shows $53,000 would probably only buy around two years’ rent for a typical Sydney apartment, which means potential buyers might be spending more on rent while trying to save for a larger deposit.
But first-home buyers still living with parents would be better off saving a little longer for a larger deposit.
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