New scheme will help young people into housing market
FOR Jordan Sampson, owning his own home remains very much an integral part of the Australian dream.
The 26-year-old and his fiance Emma, 30, are in the final stages of purchasing their first house together.
The couple would be prime candidates for the first home buyer scheme to be introduced by the Federal Government next year.
The First Home Loan Deposit Scheme targets people earning under $125,000 a year or couples with a combined income under $200,000.
It will mean first home buyers won't need to save for a 20 per cent deposit, instead only needing five per cent, and will avoid them having to pay about $10,000 in Lenders Mortgage Insurance (LMI).
The value of homes purchased through the scheme will be determined on a regional basis. The Ipswich couple has spent the past two years saving up for a six per cent deposit on a Bundamba property, with Jordan in particular keen to get a foot in the housing market.
He believed the scheme would be a positive introduction for people in their position, even if it meant paying more eventually due to having a smaller deposit.
"Every bank and every credit union we've spoken to, as soon as you mention you don't have the 20 per cent, LMI is involved automatically and the interest goes up," he said.
"It's kind of something we've come to accept that it is going to be higher interest regardless of who we go through.
"For us, we're trying to get into the market first and looking at refinancing later down the track when we've paid a bit more off."
He said the couple had forgone a lot over the past couple of years to save up for the deposit.
"(Emma) was more or less happy to rent but it's something I've always wanted to do," he said.
"Just to have a backyard and something that I can say is ours. It's yours to do what you want with. It's a place to call home."
Senior lecturer in economics at the University of Southern Queensland's School of Commerce Dr Mafiz Rahman believed the scheme would be a boon for young people and smaller banks.
"For young people who have not been in the job market very long, it is an opportunity for them to get into the housing market," he said.
"A smaller bank now can compete with the big banks because the deposit is insured by this policy as the government is taking responsibility of the insurance company. Smaller banks will also be more competitive."
Dr Rahman said banks must check thoroughly the repayment ability of borrowers for the scheme to work well.
for the policy to work well, banks must conduct thorough checks of the credential of loan seekers about their repayment capacity.
"They can pay only five per cent for example, so that means there is a 95 per cent loan on their head," he said.
"On the other hand, to put together a 20 per cent deposit, you have to work at least 10 years so you (might not be able to) afford the house. By this time, the house price will increase further."
"So it is a great opportunity for those who are dedicated, who have the savings and who don't spend a lot of money (on things like going out/clubbing).
"For the dedicated Australian who wants to be a home owner, I think it is a great opportunity."