The monthly finances
The monthly finances

Big four vying for loan scheme

EXCLUSIVE: The big four banks are all vying to be hand-picked to offer mortgages under the Federal Government's new First Home Loan Deposit Scheme.

The Commonwealth Bank and Westpac are the frontrunners to be selected as the two big banks to take part in the scheme over ANZ and National Australia Bank, industry sources have told News Corp.

Only two of the big four banks will be allowed to be part of the scheme, alongside multiple smaller lenders spread across the country.
However, banking sources have voiced their concerns about being able to get their businesses ready for the program with limited weeks' notice if successful.

The scheme allows first home buyers to have as little as a five per cent deposit saved up and the government will act as the guarantor for the remaining 15 per cent deposit.

The scheme begins on January 1 and is only available to the first 10,000 applicants.

Traditionally entry-level buyers need to have a 20 per cent deposit saved up otherwise they are hit with the expensive lenders' mortgage insurance (LMI).

Under the scheme borrowers will not have to pay LMI.

It remains a hefty charge that protects the lender not the borrower if there is a default on the loan.

First home buyers only need to save up a five per cent deposit under the new First Home Loan Deposit Scheme.
First home buyers only need to save up a five per cent deposit under the new First Home Loan Deposit Scheme.

Insurer Genworth's LMI calculator estimated on a $500,000 property a borrower with a five per cent deposit ($25,000) could pay around $16,000 in LMI charges.

Housing Minister Michael Sukkar said the lenders who would offer loans under the scheme were just weeks away from being revealed.

"The National Housing Finance and Investment Corporation are currently in the process of determining the panel of lenders," he said.

"There has been overwhelming interest from large and small lenders as well as potential first home buyers.

"In December NHFIC will select and engage up to two major bank lenders as well as select and engage non-major bank lenders."

Latest CoreLogic figures showed the national median house price is in Sydney was $818,000, Melbourne $650,000, Brisbane $493,000, Adelaide $433,000, Perth $435,000, Hobart $460,000, Darwin $394,000 and Canberra $601,000.

Home Loan Experts' managing director Otto Dargan said the new scheme was great "for first home buyers to get their foot in the door".

"They're saving tens of thousands of dollars in fees (LMI) when they purchase a property and as a result they need a smaller deposit," he said.

From January 1 eligible first home buyers will be able to apply for loans under the First Home Loan Deposit Scheme.
From January 1 eligible first home buyers will be able to apply for loans under the First Home Loan Deposit Scheme.

But he said the scheme could face challenges because it's "limited in size so only one in 10 first home buyers are likely to get it."

"We expect the lenders will get inundated with applications the moment it is released so there will be delays getting approved.

"We're recommending to our clients that they get ready to apply now that way when the scheme starts in a few months they can put in their application right away so that they don't miss out."

It does not remain clear if the interest rates offered on these loans would differ to other loan products available.

Loans under the scheme are set up with principal and interest repayments and borrowers' eligibility would be confirmed at pre-approval stage.

sophie.elsworth@news.com.au

@sophieelsworth

 

FIRST HOME LOAN DEPOSIT SCHEME

• Starts on January 1, 2020.

• Available to 10,000 applicants each year.

• Income threshold will be up to $125,000 per annum for singles and up to $200,000 for couples which will be assessed in previous financial year.

• Available to owner occupier principal and interest loans.

• Property price thresholds apply in each state for capital cities and regional areas.



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