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Rates on hold, but help is on the way for first home buyers


Sept 2019: RBA Cash Rate Decision Announced

After recent interest rate cuts, the RBA is leaving the official rate on hold this month. The official cash rate sits at the record low of just 1.00%.

(Click here to read the offical RBA statement by Philip Lowe, Governor.)

While the record low cash rate is good news for many looking to buy property, saving for a deposit is still the biggest impediment for most first home buyers.

An additional problem is that unless you have saved enough to secure a 20% deposit, (which is likely to take at least several years), you will also have to stump up for Lenders Mortgage Insurance. That can amount to many thousands of dollars more. On a $400,000 loan, for example, with a 5% deposit, LMI can amount to a more further $12,000.

The Government First Home Loan Deposit Scheme

To provide some assistance, from 1st January 2020, the Government is introducing a grant that will make home-ownership far more attainable for many eligible first home buyers. Under the new scheme, only a 5% deposit will be required. The Government will guarantee the rest, covering the remainder under a special loan.

So, if you're looking to buy your first home, you could potentially be able to enter the property market much quicker than before and avoid having to save the extra required for LMI.

However, there are a few restrictions: the scheme is restricted to 10,000 borrowers and limited to those earning under $125,000, or $200,000 for a couple.

Key Points:

  • If you save a 5% deposit, the Government will guarantee the remaining 15% deposit

  • You can avoid LMI, but still have to borrow the remaining 95%

  • The scheme is limited to 10,000 buyers

  • Begins 1 January 2020

  • It will be administered by the National Housing Finance and Investment Corporation (NHFIC) in partnership with lenders

  • The Government will prioritise 'smaller lenders' to boost competition

Together with the low-interest rates, this new Government scheme could be just the boost you need to jump onto the property ladder for the first time, so it's well worth checking out if you are eligible.

If you’re interested in applying, please don't hesitate to contact us so we can get the ball rolling.

DISCLAIMER: This article provides general information only and may not reflect the publisher’s opinion. None of the authors, the publisher or their employees are liable for any inaccuracies, errors or omissions in the publication or any change to information in the publication. It was prepared without taking into account your objectives, financial situation or needs. Please consult your financial adviser, broker or accountant before acting on information in this publication. Please click here for disclaimer information and terms of use for this website and terms of use for this website and all our associated media as well as information regarding to links to 3rd Party / External websites that are not related to APLS Finance Solutions.

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