These incentives tend to push dwelling prices higher,he says. “When these sweeteners are announced,the market moves pretty quickly,firstly at the lower end[of prices],before permeating to the rest of the market,benefitting existing home owners,” Whelan says.
Low deposit schemes can help first home buyers into the market,while shared equity schemes can also help,though the numbers of planned new dwellings are “pretty modest”,Whelan says.
The Albanese government’s Help to Buy scheme is expected to assist 40,000 first home buyers and those who have previously owned a property over the next four years. They will probably need a deposit of only 2 per cent.
Under the scheme,the federal government buys up to 30 per cent of an existing property,and up to 40 per cent on a new build,with the buyer owning the rest.
There are purchase price caps,depending on the location of the property as well as salary limits. Each state and territory will have to legislate for the scheme,which is expected to come into effect next year.
The Albanese government has also increased the target to build new homes from 1 million to1.2 million over the next five years,starting from the middle of next year,where financial incentives are offered to the states and territories.
The federal government also has programs to increase the number of affordable rental homes. There are also schemes that help first home buyers and others who find it difficult to save a deposit.
The National Housing Finance and Investment Corporation administers three low-deposit home purchase guarantees through which qualifying home buyers pay a deposit of only 5 per cent,or 2 per cent,depending on the guarantee.
Applications for guarantees can be made directly with participating lenders,or through mortgage brokers.
Loading
Borrowers should think carefully before accessing a low-deposit scheme,says Peter Marshall,the banking and rates expert at comparison site Mozo.
The mortgages available to those with small deposits tend to have higher interest rates than those available to people who buy with a larger deposit,he says.
The smaller the deposit,the easier it is to fall into “negative equity” where,if property prices were to drop,the mortgage could be worth more than the property,Marshall says.
Some experts havewarned that first home buyers who have received parental assistance for a deposit can be more likely to fall behind on repayments,or to default,as they have not experienced the financial discipline of saving for the deposit themselves.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Expert tips on how to save,invest and make the most of your money delivered to your inbox every Sunday.Sign up here for our Real Money newsletter.