Welcome to this month’s Dominion Finance Newsletter for May 2023
There was so much speculation in the media and with the finance experts whether the Reserve Bank of Australia (RBA) would maintain the current cash rate or raise it at least one more time, we thought we might give it a rest and talk about something else. (In case you missed it, they raised it another 25 basis points. Clearly, they take their job more seriously than being popular.)
Instead, this month’s newsletter is about changes to the Home Guarantee Scheme that the Federal Government has made and will take effect from 1 July 2023.
With the on-going rental shortage across the country and soaring rent prices the government is keen to have as many people as possible purchase their own home. House prices have been dropping, though latest data from Corelogic shows that it looks like they have hit the bottom and are starting to rise again. This has been attributed to the increase in migration numbers and the number of renters buying a home to give themselves housing security.
To assist renters and first home buyers, the government has introduced several changes that will allow more people to access the different guarantee schemes, including the First Home Guarantee, Regional First Home Buyer Guarantee, and the Family Home Guarantee.
The following are some of the changes to the eligibility criteria:
- Permanent residents are now eligible to participate in all three guarantees. Previously, the guarantees were only available to Australian citizens.
- Joint applications are now available to friends, siblings, and other family members. The eligibility criteria for the First Home Guarantee and Regional First Home Buyer Guarantee will be expanded to allow couples who are not in a relationship to join the scheme.
- The eligibility criteria for the Family Home Guarantee has been expanded from just natural or adoptive parents, to include eligible borrowers who are single legal guardians of children, such as aunts, uncles, and grandparents.
- Previous property owners can now enter the scheme, limited to those who have not owned a property in Australia in the last ten years.
These changes aim to address Australia’s housing challenges and support those who have fallen out of homeownership, such as those who have experienced financial crises or relationship breakdowns.
The expansion of the Home Guarantee Scheme is an excellent opportunity for first home buyers with a minimum 5 per cent deposit to enter the property market and avoid paying the usual lenders’ mortgage insurance that applies to those with less than a 20 per cent deposit. Instead, the government guarantees the remainder of the missing deposit up to 15 per cent.
The Single legal guardian expansion for Family Home Guarantee scheme currently supports eligible single parents with at least one dependent child to buy a home with as little as 2 per cent deposit without paying Lenders Mortgage Insurance. The government guarantees a maximum amount of 18 per cent of the value of the property.
These changes should help more families and individuals achieve the dream of homeownership. It will allow them to access vital assistance, just as couples have been able to previously.
There are limited places available, and they normally are taken quickly, therefore if you think this could benefit someone that you know or want to find out more, please contact us.
Until next month.
At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 3.85 per cent. It also increased the rate paid on Exchange Settlement balances by 25 basis points to 3.75 per cent.
Inflation in Australia has passed its peak, but at 7 per cent is still too high and it will be some time yet before it is back in the target range. Given the importance of returning inflation to target within a reasonable timeframe, the Board judged that a further increase in interest rates was warranted today.