As per a research by the Grattan Institute, rates in home ownership have been dropping in Australia especially among the low-income households and young individuals because there is now an increase in the difficulty in saving for a deposit for the home loan. Recently, the Morrison Government announced that they have a plan that would have these issues addressed through its First Home Loan Deposit Scheme.
This scheme will allow some of the borrowers to purchase a house even if the deposit is just at 5%. It began last January 1, 2020 and it would become effective in guaranteeing a part of the eligible deposit for first home buyers. A maximum of 15% of the scheme participants’ purchase price will effectively become guaranteed. These people must also be able to save a minimum of 5% as deposit. People also hope that this will minimize the amount that borrowers need to pay on LMI or Lender’s Mortgage Insurance that may be at times charged to the borrowers that have deposits that amount to less than 20%.
Researchers have debated on the scheme’s ability and effectiveness in increasing rates in home ownership as it is capped at just 10,000 loans every year.