Labor backs Coalition First Home Loan Deposit Scheme

Property Prices

The Coalition has a plan to help first-home buyers who are struggling to save a deposit by guaranteeing a large portion of their deposit and saving them from having to pay lenders’ mortgage insurance.

The First Home Loan Deposit Scheme has also been backed by Labor as we head towards the election this weekend, and it will mean first-home buyers can look at applying for their loan with a 5 per cent, rather than a 20 per cent deposit.

Some analysts however, are saying that the move could mean that banks lift their interest rates by up to 1 per cent to compensate covering higher risk loans and it could force banks to allocate more capital to cover risk, hitting their bottom line.

The mortgage insurance sector are also concerned that if the Government part-underwrites these loans it will take business away from them.

Scott Morrison says under the plan it will be the banks that manage the loans so they can assess the risk of default and kept open the possibility of expanding the scheme if there’s enough demand.

To qualify for the scheme, singles need to be earning less than $125,000 per annum and for couples, they need to be earning less than $200,000 between them.

Bankers say the loans would likely attract higher capital charges compared to loans that have larger deposits or that have lenders’ mortgage insurance.

Trade Minister Simon Birmingham said the new scheme wouldn’t change the rules used by banks to assess credit worthiness and only applicants who can properly service their loan would be successful, and shadow treasurer Chris Bowen agreed, saying he doubts there’ll be a high level of defaults.


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