THIS could be the model to solve the first homebuyer crisis in Australia.
Soaring house prices, tighter bank criteria, rising cost of living and enormous deposit requirements have made the dream of home ownership a nightmare for young people.
But a government-backed finance scheme in South Australia has lent billions of dollars to people who would otherwise struggle to buy a property.
The HomeStart Finance program provides mortgages for uni graduates, singles, mates buying together and seniors, and builds in repayment safeguards to buffer interest rate rises.
“We’re proud and privileged to be helping more South Australians achieve home ownership than ever before,” the organisation’s chief executive, John Oliver, said.
Supported by the State Government as part of broader initiatives to help first-time buyers, the organisation offers low-deposit mortgages for new buyers to help overcome the hurdle of a 20 per cent deposit required by bigger banks.
And at a recent global housing conference in Washington, the idea was celebrated as one that could be rolled out in locations where first-timers had been locked out.
Home ownership rates nationally in the under-35 age group have fallen to 48 per cent, compared to 60 per cent a decade ago.
News.com.au recently reported that first-time buyers needed to earn at least six figures to buy without experiencing mortgage stress and fork out tens if not hundreds of thousands of dollars for a deposit.
Sally Tindall, research director at RateCity.com.au, said scraping together enough to satisfy bank requirements was a big ask — if not impossible in Sydney.
“It’s a big amount. In Sydney, a 20 per cent deposit plus stamp duty is a whopping 40,000. It’s impossible to collect in a short space of time,” Ms Tindall said.
With HomeStart, first-timers need only to accept a deposit of three per cent of the purchase price without the need to pay hefty lenders’ mortgage insurance.
It also has a graduate loan product for people who’ve recently completed higher education.
“Educational qualifications are an essential feature of developing a case for prospective borrowers, and it should be more widely used in housing finance systems across the globe, particularly in credit assessments,” head of retail Deborah Dickson said.
State governments across the country have struggled to craft policy to support first home buyers in light of high prices.
In NSW, the number of first-timers taking up stamp duty concessions hit its highest level in July.
But with activity in major regional centres rising, it was believed new buyers were mostly looking outside of the CBD where prices remained high.
First homebuyer schemes in Queensland and Victoria have also proved popular, particularly as prices there cool.
But Ms Tindall said banks were tightening their lending practices even further, in light of the Royal Commission and new restrictions imposed by authorities.
“It’s one step forward and one step back for first home buyers,” she said.