Changes to federal government Home Guarantee Scheme spell good news for property investors

The Australian government has expanded its Home Guarantee Scheme (HGS), effective from 1st July 2022. The changes mean that more first home buyers and more single parents will qualify for a low deposit loan guarantee, likely to result in increased demand for purchases in residential property developments.

The HGS has two strands:

• First Home Guarantee (FHBG), where the government guarantees loans from mortgage lenders for eligible first home buyers with a deposit as little as 5%.
• Family Home Guarantee (FHG), where the government guarantees loans from mortgage lenders for eligible single parents with at least one dependent child, with a deposit as low as 2%.

Changes to the Home Guarantee Scheme (until recently known as the First Home Loan Deposit Scheme), applicable from 1st July, not only expand the number of places available under the scheme but also lift property price caps.

Scheme places lifted to 40,000 per year

From 1st July, First Home Guarantee places have been increased from 10,000 per year to 35,000 per year.

Family Home Guarantee places have been doubled, from a previous 2,500 to 5,000 places per year.

Property price caps lifted

In recognition of the rise in property prices across the nation, caps on the prices of properties eligible for the scheme have also been lifted.

In Sydney, Melbourne and Brisbane, for example, the cap will rise by $100,000, to $900,000 for Sydney, $800,000 for Melbourne and $700,000 for Brisbane. Caps have also been lifted in other state capitals and in all regional areas. Check out the full details at the National Housing Finance and Investment corporation website.  

New lenders announced

Also from 1st July 2022, five more lenders – Credit Union SA, Illawarra Credit Union, IMB Bank,  Newcastle Permanent Building Society and Unity Bank Limited – will offer loans under the HGS. These five lenders will join 25 non-major and two major bank lenders (NAB and CommBank) already offering the scheme to eligible home buyers.

One of the major advantages of the scheme is that it allows first home buyers with a low deposit to avoid paying for lenders mortgage insurance, because the government’s guarantee reassures lenders that they will not end up out of pocket if the borrower defaults on the loan.

Since the HGS was first introduced in 2020, it has helped more than 61,000 Australians to buy or build a home.