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These risks need to be guarded

Source: xkb.com.au
[Economic News]     02 Jan 2020
The down payment scheme for first-time home loans is likely to push up house prices further. (Photo No.7) The First Home Loan Scheme, announced by Prime Minister Scott Morrison before the May election, has been in place since Jan. Two of Australia's leading banks, the National Bank and Commonwealth Bank, are offering guaranteed loans to first-time buyers at the start of New Year's Day.
These risks need to be guarded

The down payment scheme for first-time home loans is likely to push up house prices further. (Photo of Station 7)


Prime Minister Scott Morrison`s first-home loan down payment of A $500m (First Home Loan Deposit Scheme) in the run-up to the May election has been in place since Jan. Two of Australia`s leading banks, the National Bank and Commonwealth Bank, are offering guaranteed loans to first-time buyers at the start of New Year`s Day.

Previously, buyers typically had to pay a 20% down payment to avoid paying their mortgage deposits. Under the new scheme, eligible first-home buyers will have to pay only 5% of the down payment to buy a home, with the rest being secured by National Housing Finance and Investment Corporation, a state-owned housing finance and investment firm, for a loan in particular. They were able to enter the market earlier.

Another 25 non-major lenders are involved in the scheme, and they will launch guaranteed loans from Feb. The plan will support up to 10,000 deposits per fiscal year, only 10% of the first - time homebuyers market.

All participating lenders have promised not to charge higher rates than unplanned customers to eligible customers. Many agencies will introduce other incentives.

Applicants will be subject to eligibility criteria and have a corresponding housing price threshold.


Eligibility criteria

  • Singles have a taxable annual income of less than $125000 and couples have a taxable income of less than $200,000,
  • Scheme Home Ownership (No Investment Support)
  • previously did not hold the property or did not enjoy the inheritance share of the property estate.


Upper house prices

The down payment for initial home loans is limited to $700,000 in sydney and $600,000 in melbourne, up from the ceiling in some other regions.

1. New States

Sydney, Newcastle, Lake Macquarie, Wollongong/Illawarra:$700,000

Other parts of the state:$450,000

2. Victoria

Melbourne, Geelong:$600,000

Other parts of the state:$375,000

3. Kunju

Brisbane, Gold Coast, Sunshine Coast:$475,000

Other parts of the state:$400,000

4. Western Australia

Perth:$400,000

Other parts of the state:$300,000

5. South Australia

Adelaide:$400,000

Other parts of the state: A $250,000

6. Tajikistan

Hobart:$400,000

Other parts of the state:$300,000

7. A $500,000 Capital Territory

8. A $375,000 Northern Territory


How to get a loan

The National Bank and the Federal Bank were the first major lenders to join the scheme, offering loans starting in January.

Another 25 non-major lenders have been lending since February 1, including Bendigo Bank, the Australian Credit Union (CUA) and Bank Australia.


Advice from financial experts

Financial experts warned lenders." The less they pay down, the more mortgages they will have and the longer they will pay off," says Tim Lawless of Core Logic, an Australian realstate research firm.

Although this will reduce the amount of down payment, the price for eligible people is that they will face tens of thousands of interest payments over the term of their loans, experts say.

CoreLogic has also warned that the move could push up house prices, with more people being pushed out of the market in the future for overpriced prices.

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