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HomeStart Finance, which is backed by the South Australian government, told the federal Inquiry into Home Ownership that its assisted-finance model should be rolled out across Australia.
HomeStart makes it easier for buyers to access finance by offering LVRs of 97 per cent and by accepting alternative income sources such as Centrelink benefits.
Chief executive John Oliver said home ownership rates could be improved by a federal program aimed at increasing access to affordable finance.
That would require the federal government providing support with funding and lending, Mr Oliver added.
“Nationally, affordable housing policy typically leaves the provision of finance entirely up to the private sector,” he said.
“HomeStart’s experience and results demonstrate there is a role of government to play in providing a stepping stone for customers to move from private rental or other accommodation into assisted home ownership.”
In its submission to the federal inquiry, HomeStart said the success of KeyStart Home Loans – a lender backed by the Western Australian government that provides low-deposit home loans to struggling borrowers – is further evidence of a need for such assistance.
“Both programs are constrained to operating within their respective states, and not unreasonably so given the states provide capital and ongoing funding,” the submission said.
“The consequences of this limitation is that the vast majority of Australia’s population is unable to access a valuable pathway to home ownership.”
Homestart has generated a profit every year since it was founded in 1989, and more than 80 per cent of its customers would have been unable to qualify for a mainstream loan.
“These buyers, typically on low to moderate incomes, require home finance which overcomes barriers to home ownership, such as deposit, start-up costs and borrowing capacity,” Mr Oliver said.
“Once assisted, the vast majority become reliable payers, with many quickly building enough equity in their home to refinance with a major lender.”