Westpac subsidiary St.George Bank has announced the rollout of a new offering for first home buyers (FHBs) that are unable to unsecure a 20 per cent deposit.
Effective from Monday, 13 July, St.George has reduced lender’s mortgage insurance (LMI) costs to just $1 for FHBs with a loan-to-value ratio (LVR) of up to 85 per cent.
The offer is restricted to loans of up to $850,000 for owner-occupier FHBs with principal and interest (P&I) repayment terms.
According to St.George Bank, the offer could save borrowers thousands in upfront costs, with FHBs with a deposit of less than 20 per cent currently charged a one-off LMI payment of approximately $6,000 to purchase a home worth $650,000.
St. George Bank’s general manager, Ross Miller, said the new offering addresses “one of the biggest hurdles” faced by FHBs on their home ownership journey, with the bank’s 2020 Home Buying Report finding that the most common obstacle cited by FHBs (50 per cent) was saving for a 20 per cent deposit.
“We are seeing many pain points experienced along that savings journey, including giving up holidays, reducing entertainment expenses, having to move back home with parents, moving in with friends or even leaning on family members to help top up savings,” he said.
“By reducing the expense of lender’s mortgage insurance, first-time purchasers may be able to afford a property that meets their needs sooner and save thousands of dollars.”
The bank’s research has also found that roughly one-third of prospective home buyers are looking to accelerate towards their goal of securing a deposit amid the COVID-19 crisis.
“Australians have spent more time at home than ever before during the COVID-19 restrictions, and we are seeing a bigger trend in how the nation is re-evaluating their current living situation,” Mr Miller added.
“For example, three-quarters of people would now prefer to live in a house over an apartment.
“First home buyers are calling for new ways to achieve their home ownership dreams sooner, and this option is designed to help make that goal within closer reach, particularly with the added benefit of a record-low interest rate environment.”
St.George Bank’s new offering is the latest among a number of initiatives aimed at improving housing affordability for FHBs, including the second phase of the federal government’s First Home Loan Deposit Scheme, which opened on 1 July.
The scheme first launched in January of this year, with 10,000 places being made available for the six-month period January to June 2020.
A further 10,000 places have now been made available for the 2020-21 financial year.
[Related: Major bank cracks down on borrowing capacity]
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Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.