1 in 3 first home buyers used guarantee schemes

Home buyers are increasingly taking advantage of the expanded Home Guarantee Schemes, according to the National Housing Finance and Investment Corporation (NHFIC).

According to the NHFIC’s fourth annual Home Guarantee Scheme Trends and Insights Report, which was released yesterday (9 October), the number of guarantees in the 2022–23 financial year was more than 32,500, an increase of approximately 39 per cent from the previous year when only 23,300 guarantees were issued.

Consisting of the First Home Guarantee, the Family Home Guarantee, and the Regional First Home Buyer Guarantee, the data revealed the scheme’s share of the first home buyer market grew significantly, with almost one in three first home buyers in 2022–23 supported by the scheme, up from one in seven in 2021–22.

The report also found the guarantee scheme had issued approximately 7,721 guarantees to key workers in the past financial year, up from 5,650 in 2021–22, with over a quarter of all guarantees under the First Home Buyer Guarantee issued to key workers such as teachers, nurses, and social workers.

Almost 10,000 households have already transitioned out of the guarantee scheme, according to the report, with around 12 per cent of total guarantees issued since its inception having been released.

Most buyers transitioning out of the scheme had accumulated enough equity to achieve an LVR of less than 80 per cent and therefore no longer require the guarantee, the data showed.

Queensland saw the strongest uptake of the schemes, with Queensland’s share of places within the First Home Buyer Guarantee around 25 per cent, relative to a population share of 20 per cent.

Arrears under the guarantee scheme were also found to remain low, according to the data, remaining below 0.1 per cent, markedly less than for high loan-to-value ratio lending. However, the report did state “in the coming year, arrears may rise in line with the broader home loan market”.

The NHFIC’s report also revealed there was an increase in younger buyers participating in the scheme, with more than half of all places under the First Home Buyer Guarantee and Regional First Home Buyer Guarantee in 2022–23 being under the age of 30.

Speaking to Mortgage Business about the new data, Panache Financial director Ashleigh Pakis said she had “definitely” seen an increase in younger people looking to take advantage of the government guarantees.

The regional broker said she had also seen more people hoping to use the schemes since July’s expansion of eligibility.

Ms Pakis stated: “It’s been good because this year they have allowed permanent residents, non-married couples and siblings [to] buy properties together as well.

“I think that’s really changed the criteria because a lot of siblings will live together and rent together but now they can borrow together and they’re paying down a property not just paying compulsory rent ongoing.

“And the permanent residency, that’s a big factor as well because that’s allowed them to buy with the lower deposit and that just gives them a better advantage.”

As Panache Financial is based in Goulburn, the broker has also seen an increase in clients looking to take advantage of the regional and the family guarantee schemes, particularly the 2 per cent deposit for single parents.

She said: “That has really helped because, obviously, a single parent has high expenses and family costs so the potential to save while renting there is definitely a lot of stress on it.

“Because of bank policies we can use their rental ledgers to show evidence of genuine savings to be able to use gifted funds, and generally, families are giving early inheritance or able to give a gift of funds that we can use as a deposit, which is definitely allowing them to get into the market.”

Ms Pakis also emphasised that writing the loans under the government’s guarantee schemes didn’t require much extra effort.

“It’s actually quite easy. It’s just a stat dec (statutory declaration) and having a notice of assessment and the contents of what the application takes. So it’s realistically two more forms, it’s not that much more,” Ms Pakis added.

She added that the guarantee schemes were providing an opportunity for those who faced rent rises and were previously unable to break into the property market to get a foothold.

Ms Pakis used an example of a lady she helped who used the Family Home Guarantee Scheme to start paying off a mortgage rather than spending an additional $100 a week in rent.

“She used the Family Home Guarantee Scheme. She was like if I’m going to be paying this ($100 a week rent increase) I should be paying a mortgage and she has now bought a lovely house and the children will have their own bedrooms”, Ms Pakis concluded.

Federal Minister for Housing Julie Collins said she was glad the guarantee scheme was working.

Ms Collins stated: “It’s great to see so many Australians have been helped into home ownership through the Albanese Government’s expanded Home Guarantee Scheme.

“I’m pleased our expanded Home Guarantee Scheme is helping key workers find a secure place to call home. It’s also great that so many young people have benefited from the expanded Home Guarantee Scheme.

“We’ll keep working to ensure more Australians have a safe and affordable place to call home including the introduction of Help to Buy, which will join the Home Guarantee Scheme next year.”

[Related: 40,000 new places open up under Home Guarantee Scheme]