First Home Loan Deposit Scheme

Some details finally emerging...


The $500-million scheme is designed to provide first home buyers (FHBs) earning up to $125,000 ($200,000 for couples) with “a significant leg up” by making available to them 95 per cent loan-to-value ratio mortgages should they have a deposit of at least 5 per cent.

The scheme is to be administered by the National Housing Finance and Investment Corporation (NHFIC), which commenced consultation with stakeholders in September.



Price Caps

• NSW: A price cap of $700,000 in capital cities and regional centres, with a cap of $450,000 in the rest of the state.
• Victoria: A price cap of $600,000 in capital cities and regional centres, with a cap of $375,000 in the rest of the state
• Queensland: A price cap of $475,000 in capital cities and regional centres, with a cap of $400,000 in the rest of the state
• Western Australia: A price cap of $400,000 in capital cities and regional centres, with a cap of $300,000 in the rest of the state
• South Australia: A price cap of $400,000 in capital cities and regional centres, with a cap of $250,000 in the rest of the state
• Tasmania: A price cap of $400,000 in capital cities and regional centres, with a cap of $300,000 in the rest of the state
• ACT: A price cap of $500,000
• Northern Territory: A price cap of $375,000

Lender eligibility

The government has also proposed eligibility criteria for the selection of credit providers to facilitate loan guarantees.

According to the government’s direction, credit providers will be selected on the basis of:

• the lender’s standard of customer care, including their treatment of borrowers in financial hardship;
• the competitiveness of loan products offered by a lender for the purposes of the FHLDS, including interest rates and other fees;
• the quality of a lender’s loan origination processes and the associated level of financial risk to the Commonwealth;
• the reputation of the lender;
• the extent to which the decision to approve a lender will promote competition in lending markets and related markets; and
• the extent to which all the lenders approved for the financial year when considered together can undertake credit activities (including through other entities providing credit services) across Australia.

Moreover, the government revealed that the big four banks (including their subsidiaries) will not be permitted to facilitate more than 5,000 loan guarantees in each financial year, in a bid to enhance market competition.



APRA to adjust capital requirements for FHLDS

In light of the government’s proposals, the Australian Prudential Regulation Authority (APRA) is proposing to adjust its capital requirements for authorised deposit-taking institutions (ADIs) to support the FHLDS.

“Recognising that the government guarantee is a valuable form of credit risk mitigation, APRA is proposing to reflect this in the capital framework by applying a lower capital requirement to eligible FHLDS loans,” the regulator has noted.

APRA stated that it intends to give effect to this lower capital requirement by adjusting the mortgage capital requirements set out in Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112).

Specifically, APRA proposes to allow ADIs to treat eligible FHLDS loans in a comparable manner to mortgages with a loan-to-valuation ratio of 80 per cent, which would allow eligible FHLDS loans to be risk-weighted at 35 per cent under APRA’s current capital requirements.

The prudential regulator added that once the government guarantee ceases to apply to eligible loans, ADIs would revert to applying the relevant risk weights as set out in APS 112.

 

I'm glad I didn't wait for this, no way I'm going to find a good positioned, good size land in Adelaide for $400.000

Well, I also realised that you won't be able to buy a house at least 10km or so from the city.

This looks more aimed to avoid a price crash in apartments due to oversupply?

 

In Sydney this will just be used on apartments or small houses out west/south west.

 

Saw a few negative comments about this in the media today, along similar lines of how the limits aren't high enough to buy a "decent" property.

Not really sure what more first home buyers expect? We are living in a point in time where they have first home buyer grants, stamp duty discounts, record low interest rates and now LMI free , government sponsored 95% LVR loans. Maybe next we need forcible eviction and asset reassignment from the baby boomers?

The limits seem pretty reasonable to me for entry level property in each of the states. If people want to enter the market in more aspirational suburbs then they need to pull up their big boy pants and come swim in the free market, which means, shock horror - no discounts, normal loan conditions and competing with upgraders, investors etc.