Potentially thousands of first home buyers missing out amid confusion over 5% deposit system – realestate.com.au

Countless potential first-home buyers are at risk of missing out on thousands of dollars in savings due to confusion over whether they qualify for government assistance.

More than 21,000 first home buyers have taken advantage of the government’s extensive First Home Guarantee in the past four months. According to government estimates, this is one in ten properties purchased across the country using the scheme in October alone.

The scheme allows first home buyers to purchase a home with as little as a 5% deposit, with the government guaranteeing up to 15% of the property value, bridging the gap to a 20% deposit and removing the requirement for expensive mortgage insurance from lenders.

The Expansion October The caps on the number of places in the scheme have been removed, income caps have been abolished and property price thresholds have been updated to be more in line with average property prices across the country.

The latest Mortgage Choice Home Loan Report, which is based on home loan application data and a national survey of 1,000 consumers, shows that 28% of potential first-time buyers say the program’s expansion has pushed them to buy sooner.

Despite this, the confusion over eligibility for the scheme since its changes in October means it may have hindered significantly more first home buyers than it has helped.

“A quarter of potential buyers say they don’t know if they qualify,” said Anthony Waldron, CEO of Mortgage Choice.

“These highlight the importance of getting expert advice from a mortgage broker, especially if you are new to the property market.”

To take advantage of the scheme, potential buyers must meet a range of eligibility criteria, ranging from age and nationality to property price ceilings and intentions on how they will use the property.

Unlike other similar government support measures in the past, people in any tax bracket can benefit from the scheme thanks to the removal of income restrictions, one of the common misconceptions about eligibility.

While many miss this, Mr Waldron said the plan’s impact on the market since October “has been undeniable”.

“For most first home buyers, these shifting targets mean the scheme could be the helping hand they need to accelerate their entry into the market.

“Seeing the average loan size increase by more than $80,000 in markets that have historically been more accessible, such as South Australia and the Northern Territory, shows how challenging the market has become for first home buyers.”

Data from the Australian Bureau of Statistics this week shows strong first-home buyer activity between October and December has led to an increase in lending activity across all types of borrowers.

A total of 31,780 loans were made to first home buyers in the quarter, with the total value of loans increasing by 15.5% compared to 2023.

This article first appeared on Mortgage choice and is republished with permission.