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As 50,000 new places open up for the Home Guarantee Scheme, brokers have flagged shortcomings with its current parameters.
While brokers have been busy preparing communications to ensure clients are well informed of the new places opening up (including through personalised consultations and regular updates through emails, newsletters, and social media etc) for the financial year 2025 Home Guarantee Scheme, there are concerns that increasing house prices and income bracket creep are reducing the efficacy of the schemes.
On Monday (1 July), 50,000 new places were made available under the government scheme:
- 35,000 places for the First Home Guarantee (FHBG).
- 10,000 places for the Regional First Home Buyer Guarantee (RFHBG) until 30 June 2025.
- 5,000 places for the Family Home Guarantee (FHG) until 30 June 2025.
The schemes currently have income and property price caps in place, with NSW capital cities/regional centres having the largest price cap ($900,000), followed by Victoria ($800,000), and Queensland ($700,000).
All other regional areas have property price caps of between $400,00 and $750,000.
However, house prices rose by 8 per cent in FY24, according to the latest figures from CoreLogic, taking the median dwelling value in Australia to $794,000.
Speaking to The Adviser, Sandy Paravizzini, the general manager – retail at brokerage Resolve Finance, said that demand for the government-backed schemes had been particularly popular with first home buyers in recent years.
“In FY24, a significant proportion of our clients took advantage of these schemes and the number of first home buyer schemes and grants our brokers have assisted with has increased by 29 per cent from FY23 to FY24,” he said.
According to the GM of the brokerage brand, part of the demand can be attributed to better serviceability for FHBs.
For example, the Home Guarantee Scheme loans are assessed by lenders at a loan-to-value ratio (LVR) of 80 per cent, providing higher borrowing capacities and less stringent policies than those restricted by LMI, as well as lower interest rates.
“The delivery rates are based on 80 per cent LVR, which can be significantly lower than if they were a normal 95 per cent loan without the scheme,” he said.
“It really does mean the difference between buying or not being able to buy a first home.
“We anticipate strong demand for FY25. With a $500,000 loan, clients only need a 5 per cent deposit with no LMI (around $14,000), and they benefit from low rates with major banks and fully featured loans. Additional incentives like stamp duty exemptions and the $10,000 First Home Owner Grant make these schemes very attractive.”
Price caps need revisiting, brokers warn
However, while he acknowledged that the schemes had been very beneficial for Australians wanting to achieve their dream of home ownership, he said that growing house prices were reducing the efficacy of the schemes.
Paravizzini said: “In many regions, the median house price has been creeping up so we would like to see the price caps reviewed and increased in line with market growth.
“This is particularly important in regions like Bunbury WA, where the cap is $450,000.
“We haven’t been able to provide the benefits of the scheme to many, if any, of our customers in that region, as the first home buyer house and land entry price point of our builder partners in Bunbury sits around $530,000.
“Addressing these regional discrepancies would significantly enhance the scheme’s effectiveness and reach.”
Similarly, Chris Raymond, principal finance broker at Sydney-based brokerage Unconditional Finance, said that while demand for the Home Guarantee Schemes was particularly popular when it first launched, demand has fallen in NSW since then given rising house prices and income creep.
“We find that the number of clients eligible, based on serviceability and income restrictions, are limited,” Raymond explained, saying that only about 2 per cent of the brokerage’s settlements fell under the First Home Guarantee Scheme requirements in FY24 “most of whom were singles, or couples with no dependents”.
“If we manage to satisfy the income requirements, the price caps can also hold our clients back.
“The demand for FHGS is limited among our clients in Sydney given the price cap of $900,000.
“I’d love to see the income and purchase price restrictions increased.
“The median house price in Sydney is close to $1.6 million yet the maximum income a single person in Sydney is only $125,000 under the scheme or $200,000 as a couple.
“More of our clients in Sydney and interstate would access the scheme if the income and price restrictions were increased.”
What do you think of the efficacy of the Home Guarantee Schemes? Let us know in the comments below!
[Related: 50k places open for Home Guarantee Schemes]
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