On 1 January, the federal government’s First Home Loan Deposit Scheme officially launched to the public.
Administered by the National Housing Finance and Investment Corporation (NHFIC), the scheme aims to provide up to 10,000 first home buyers (FHBs) per year with access to housing finance with a deposit of at least 5 per cent, allowing FHBs to enter the property market earlier.
The scheme will see the government guarantee the difference between the borrower’s 5 per cent deposit and the standard 20 per cent deposit required to take out a home loan without paying lender’s mortgage insurance.
Initially, the FHLDS required borrowers to find a property and enter a contract of sale within 90 days from the date they were first pre-approved under the scheme. However, the NHFIC has now allowed for an extension to this period given the social distancing requirements now in place, including the banning on public auctions.
As such, the NHFIC said participating lenders have now been given the ability to extend successful applicants’ places by a further 90 days, provided they were still eligible and satisfied the lender’s credit criteria. However, this extension will be granted at the discretion of the lender.
“The option to extend the 90-day pre-approval period gives both scheme lenders and first home buyers the flexibility and support to deal with the evolving COVID-19 situation,” NHFIC CEO Nathan Dal Bon said.
“Places are still available through scheme lenders, and they are continuing to accept applications,” he added.
According to NHFIC data from February 2020, just over 100 borrowers had reached settlement on their loan, with approximately 6,000 places “on hold” for FHBs while they looked for and secured a property.
Given that the number of owners withdrawing their property from auction soared to 40 per cent last week, following the introduction of a ban on auctions and open homes, the number of properties being sold has dropped in tandem.
According to CoreLogic, in the week ending 29 March, 3,203 homes across capital cities were set to go under the hammer. This would have made it the busiest week for auction activity so far in 2020.
However, due to the government restrictions coming into play on 25 March that banned in-house and on-site auctions, 40 per cent of those properties were withdrawn from auction.
The withdrawal rate shot up from just 7.5 per cent the previous week, according to property research group CoreLogic.
The remaining 60 per cent of auctions were forced onto online and remote platforms and returned a preliminary clearance rate of 51.4 per cent, the lowest preliminary rate recorded since June 2019.
[Related: Auction ban drives up withdrawal rates]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.