- About 1 in 3 first home buyers last financial year were supported by the government's Home Guarantee Scheme (HGS).
- Approximately 88% of the available places in the HGS (43,800 of 50,000) were taken up during the period, up 34% from the previous year.
- Expanded eligibility criteria and rising mortgage costs were seen as the driver of the uptake.
- Regional Australians, as well as key workers such as teachers and nurses were significant participants of the Scheme.
- More joint borrowers and an increase in the age and income profile among participants were noted in the 2023-24 financial year.
This marks a significant increase from 10%, or one in 10, of all first home buyers supported by the HGS during its first year of operation in 2020.
The Housing Australia's Home Guarantee Scheme Trends and Insights Report 2023-24 released on Monday revealed that 88%, or 43,800 of the 50,000 available places, were taken up over the financial year, up 34% from the previous period.
"The stronger take up under the Scheme in the last year is likely due to a combination of the expanded eligibility criteria, coupled with a more challenging purchasing environment for those without any additional support," the report stated.
This comes after CommBank data found an increasing proportion of first home buyers are opting to buy alone, and its thought that government support is replacing the need for a partner.
Overall, first home buyer participation has fallen by 33% from 2020-21, when loans for first-time homeowners were at all-time highs.
Towards the end of 2020, first home buyers, who tend to be more sensitive to interest rates and home price rises, have been forced out of the market following a series of cash rate rises since May 2022 and strong property price growth.
However, there's been a notable rebound in first home buyer lending, based on the ABS lending data which shows first home buyers closed out the 2024 financial year with a total of $5.54 billion in new home loans in June, up 4.2% from the same month in FY 2022-23.
The Home Guarantee Scheme is a government initiative that helps eligible home buyers borrow up to 98% of the property value, or with just a 2% deposit without having to pay lenders mortgage insurance (LMI).
The government provides participating lenders with a guarantee to cover the remainder of the required 20% deposit.
The Scheme consists of three components, namely First Home Guarantee (FHBG), Regional First Home Buyer Guarantee (RFHBG), and Family Home Guarantee (FHG).
Changes to eligibility criteria driving popularity
Since its initial implementation in January 2020, several significant expansions on the eligibility criteria for the HGS were implemented from 1 July 2023, including the following:
- Permanent residents of Australia are now eligible, whereas previously only Australian citizens could apply.
- The Family Home Guarantee was broadened to include not just single natural or adoptive parents but also legal guardians such as aunts, uncles, and grandparents.
- The eligibility for the First Home Guarantee and the Regional First Home Buyer was expanded to include individuals who haven't owned a property in the last 10 years.
- Joint applications, which were previously restricted to married or de facto couples, were expanded to two applicants such as friends or siblings.
Regional Australians, key workers utilise the Scheme
The report found an increasing number of regional Australians participating in the Scheme since the introduction of the RFHBG in October 2022.
In its full year of operations, over 13,100 Aussies across 8,000 regional areas accessed the RFHBG.
Of those participants, 42% had previously been renting in regional Australia for two or more years.
The RFHBG enables first home buyers to purchase a home in regional areas with as little as a 5% deposit without paying LMI.
Key workers were also active participants of the Scheme, with over 11,300 entering home ownership in 2023-24, an increase of 28% from 8,800 in the previous financial year.
More than one in four of all guarantees issued under the HGS were to key workers such as teachers, nurses, and social workers.
"In a recent survey of these key workers, the majority said that accessing stable housing close to their place of work, including schools and hospitals, was the main driver for choosing the home they purchased with the support from the Scheme," according to the report.
In terms of geographical distribution, Victoria had the highest participation in the Scheme in 2023-24, accounting for 28% of the total, followed by Queensland (24%) and Western Australia (15%).
Rising mortgage costs reshape borrower demographics
The report found joint borrower participation and the age and income profile of guarantee recipients increased, likely reflecting the higher costs of servicing a mortgage.
The median national purchase price under the Scheme was approximately $455,000 for single borrowers and $600,000 for joint borrowers.
These figures were below the average home loan values in June 2024, which were $535k for first home buyers, $637k for owner occupiers, and $639k for investors.
They are also greatly below median home values through most of the country.
According to Housing Australia, 53% of buyers accessing the Scheme were aged 30 years or older, up from 42% the previous year.
Meanwhile, 62% of all guarantees issued in 2023-24 were to joint borrowers, up from 51%.
The median income of joint and single borrowers increased by 8% to $132,000 p.a., and 11% to $83,000 p.a., respectively.
In 2023-24, the typical profile of a First Home Guarantee recipient was a household where the primary borrower was in their early 30s, with a median income of around $85,000 for single and $134 for joint borrowers.
The Regional First Home Buyer supported mostly buyers aged 25-29, with a median income of $78,000 (single) or $126,000 (joint).
The Family Home Guarantee supported borrowers within the 35-39 age range, earning a median income of $79,000.
More participants transition out of the Scheme
The report also found that more than 19,000 loans that were supported by the HGS (18% of the total guaranteed issued) have already transitioned out of the Scheme after an average of two years.
This translates to nearly 1 in 5 households no longer requiring government support.
According to Housing Australia, approximately 60% of home buyers who transitioned out of the Scheme either paid down the loan to under 80% loan-to-value ratio (LVR) or refinanced to another lender.
"The strength of the Scheme is further demonstrated by the number of participants that have transitioned out of the Scheme due to equity built up," said Jennifer Chew, HA chief program officer of Home Ownership.
On the other hand, the number of borrowers in arrears or those accessing hardship support remains well below relevant market benchmarks.
Approximately 0.1% of active loans supported under the HGS are currently in arrears, while 1% of the portfolio is accessing hardship support.
Photo by Drazen Zigic on Freepik
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