Opinion

First home buyer support welcome

By Shepparton News

For young people wanting to enter the property market, the experience can be a daunting one.

The biggest lump sum expense is the deposit.

Many banks will lend prospective home buyers up to 95 per cent of the purchase price, but buyers need the remaining five per cent in proven savings — and even then, there’s not necessarily any guarantee of getting an application across the line.

Then there’s the other costs — stamp duty, which is usually thousands of dollars and depends on the value of the house; pest and building inspections; legal fees; removal costs; and other associated expenses.

If a prospective buyer is unable to stump up the 20 per cent deposit or does not have a guarantor, they currently must pay lender’s mortgage insurance to the bank which also usually costs in the thousands of dollars.

Sunday’s announcement by the Coalition (matched by Labor soon after) was that it would help first home buyers in that they would only have to save for a five per cent deposit.

Under the plan, the National Housing Finance and Investment Corporation would guarantee the difference between five per cent of the purchase price and the 20 per cent deposit.

There are several positives to this plan. It will enable first home buyers to get into the market earlier, meaning they can get into their own home months and perhaps years earlier than they might otherwise be able to.

It is also a move that will provide confidence for the housing construction sector.

However, as Prime Minister Scott Morrison insisted, this is not ‘‘free money’’.

First home buyers who benefit from this scheme will only own five per cent of the property at the beginning, meaning their monthly repayments will be higher and the amount of interest they pay will be more than if they had saved a more significant deposit.

This will be somewhat offset by the fact they will not need to pay lender’s mortgage insurance.

The other important point that has been raised in response to the policy is the potential for house prices to be pushed up with more buyers enticed into the market.

Having said that, we welcome the bipartisan support of this policy and hope many first home buyers in our region are able to take this opportunity to enter the property market.