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National Australia Bank chosen to offer government’s 5 per cent deposit loans for first-home buyers

The National Australia Bank has been chosen to offer taxpayer-subsidised mortgages for first-home buyers.

During the election campaign, Prime Minister Scott Morrison promised a $500million program so property newcomers could buy a home with a five per cent deposit.

Under his government’s new First Home Loan Deposit Scheme taxpayers will step up, sparing a borrower from having to come up with the usual 20 per cent deposit. 

The scheme is rolling out on January 1, 2020 and will support 10,000 owner-occupier loans every financial year. 

The National Australia Bank has been chosen to offer taxpayer-subsidised mortgages for first-home buyers. During the election campaign, Prime Minister Scott Morrison promised a $500million program so property newcomers could buy a home with a five per cent deposit (stock image)

First Home Deposit Scheme limits

Sydney: $700,000

Melbourne: $600,000

Brisbane: $475,000

Perth: $400,000

Adelaide: $400,000

Hobart: $400,000

Canberra: $500,000

Darwin: $375,000

Source: Treasury 

The government’s National Housing Finance and Investment Corporation has chosen NAB, Australia’s biggest business lender, to offer the new taxpayer-backed  loans.

The homes won’t have to be brand new. 

Digital Finance Analytics principal Martin North, an economist, said there was a danger many of these subsidised first-home buyers would struggle to repay their mortgage.

‘What will happen often is they’ll get the five per cent from their parents, they won’t necessarily have saved anything,’ he told Daily Mail Australia on Tuesday. 

‘Where first-home buyers get help from the bank of mum and dad, they’re more likely to default again because they don’t have the discipline. The discipline of saving is actually quite important and this essentially goes around it.’

Under his government's new First Home Loan Deposit Scheme, taxpayers will step up, sparing a borrower from having to come up with the usual 20 per cent deposit. The scheme is rolling out on January 1, 2020 and will support 10,000 owner-occupier loans every financial year (pictured are houses at Schofields in Sydney's outer north-west)

Under his government’s new First Home Loan Deposit Scheme, taxpayers will step up, sparing a borrower from having to come up with the usual 20 per cent deposit. The scheme is rolling out on January 1, 2020 and will support 10,000 owner-occupier loans every financial year (pictured are houses at Schofields in Sydney’s outer north-west)

Federal Housing Minister and Assistant Treasurer Michael Sukkar said the scheme was designed to help property first-timers buy a modest home.  

‘We want to help make home ownership a reality for more Australians,’ he said.

‘The First Home Loan Deposit Scheme has been specifically designed to support first home buyers purchase a modest home, getting them into the property market sooner.’

However, Mr North feared this policy would concentrate struggling home borrowers into poorer suburbs.

‘I personally think it’s a rather nutty policy,’ he said.

Should there be forced sales, prices would fall – leaving borrowers owing more than their property is worth, a situation known as negative equity.

‘It creates some risk for the borrowers,’ Mr North said.

‘The risk with negative equity is you have multiple people in the same area all trying to sell at the same time.’

Digital Finance Analytics principal Martin North (pictured), an economist, said there was a danger many of these subsidised first-home buyers would struggle to repay their mortgage. He feared they would be concentrated in particular suburbs and end up owing more than their property was worth - a situation known as negative equity

Digital Finance Analytics principal Martin North (pictured), an economist, said there was a danger many of these subsidised first-home buyers would struggle to repay their mortgage. He feared they would be concentrated in particular suburbs and end up owing more than their property was worth – a situation known as negative equity 

Recovery continues

SYDNEY: Houses up 1.8 per cent to $918,314

MELBOURNE: Houses up 2.4 per cent to $751,513

BRISBANE: Houses up 0.9 per cent to $539,167

ADELAIDE:  Houses up 0.5 per cent to $468,757

PERTH: Houses down 0.4 per cent to $451,815

HOBART: Houses up 0.9 per cent to $492,465

DARWIN: Houses up 0.7 per cent to $468,317

CANBERRA: Houses up 0.8 per cent to $671,968 

* Except in Perth

Source: CoreLogic Home Value Index, October 2019 based on median house prices 

Taxpayers would then lose money as struggling borrowers sold at a reduced price.

‘If something goes wrong, and they need to sell, there’s negative equity and therefore somebody has to bail them out somewhere along the line,’ Mr North said.

Eligible borrowers can buy homes worth up to $700,000 in Sydney under the scheme.

This limit, however, is well below the city’s median house price of $918,314, going by CoreLogic data.

Subsidised borrowers would therefore be concentrated in poorer suburbs in Sydney’s outer west if they wanted a house instead of a unit.

The limit is $600,000 in Melbourne, in a city where $751,513 is the median house price.

It’s set at  $500,000 in Canberra, $475,000 in Brisbane and $400,000 in Adelaide, Perth and Hobart.

NAB’s chief customer officer Mike Baird, a former Liberal premier of New South Wales, said the First Home Loan Deposit Scheme would help even more Australians get into the property market. 

‘This scheme is a fantastic way of helping even more customers, allowing them to potentially save thousands of dollars on their mortgage,’ he said. 

The scheme will be available for individuals earning up to $125,000 a year and couples on combined salaries of $200,000. 

It is only open to owner-occupiers paying off a principal and interest loan. 

Read more at DailyMail.co.uk


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