HomeStart wants Commonwealth to roll out national lending scheme for first home buyers
2015-07-13WITH the dream of owning your own home becoming further out of reach, one Australian state claims it might have the solution.
The agency acts as a lender to low- to moderate-income earners, including those on casual wages and Centrelink benefits, giving them the opportunity to buy their own home.
Not only that, but the agency doesn’t require hefty deposits like the banks, nor does it charge mortgage lender’s insurance.
The interest rate on the loan can be variable and is generally about 1 per cent higher than the banks, but repayments are structured to ensure household cashflow isn’t severely affected.
In its submission to the national inquiry into home ownership, HomeStart argues that, because of its success and that of a similar scheme operating in Western Australia called KeyStart, the Commonwealth should consider rolling out a similar scheme nationwide.
It says since its program began 26 years ago it has helped more than 66,000 households in the state, or about one in eight first home buyers.
“These buyers, typically on low-moderate incomes, require home finance which overcomes barriers to home ownership, such as deposit, start-up costs and borrowing capacity,” the submission says. “Once assisted, the vast majority become reliable payers, with many quickly building enough equity in their home to refinance with a major lender.”
The suggestion comes as the latest data from the Australian Bureau of Statistics show home loan approvals have fallen 6.1 per cent in May, which is worse than expected.
Economists had predicted only a 1.5 per cent for May.
There were 50,366 approvals in the month, compared to 53,643 approvals in April.
The total value of housing finance also fell to 4.4 per cent in the month to $31.139 billion, with investor housing loans down 3.2 per cent and owner-occupied housing down 5.3 per cent.
“Our position is that the rate of home ownership across Australia could be improved by governmental facilitation of a national program aimed at increasing access to affordable home finance,” the submission says. “Nationally, affordable housing policy typically leaves the provision of finance entirely up to the private sector. HomeStart’s experience and results demonstrate there is a role of government to play in providing a stepping stone for customers to move from private rental or other accommodation into assisted home ownership.
“The success of KeyStart in Western Australia provides further evidence of a need for such assistance.
“Both programs are constrained to operating within their respective states, and not unreasonably so given the states provide capital and ongoing funding. The consequence of this limitation is that the vast majority of Australia’s population is unable to access a valuable pathway to home ownership.”
HomeStart also says through a “prudent, adaptable and inclusive approach to managing credit risk” it has generated a profit every year of operation, returned more than $440 million to the South Australian government since inception.
However, not everyone thinks rolling out a national lending scheme is a good idea.
Simon Cowan, research fellow from the Centre of Independent Studies, warns against governments becoming too entrenched in social engineering schemes such as this, arguing it was one of the issues that led to the collapse of the housing market in the US.
“What we saw in the US was this attempt by government to expand home ownership to people who didn’t meet traditional lending criteria who had a lot of risk associated with them,” he said. “And I think when you look at areas, particularly Sydney and Melbourne, where the cost of houses are so high, the potential exposure is quite high as well.
“Having said that one of the key challenges in housing affordability in Sydney and Melbourne you need such a high deposit to get into the market.
“In the past the interest rates were so high so the repayments were relatively high but now you also have to have a high deposit.
“It’s a good idea for the government to look at this but I wouldn’t be looking at demand side solutions.
“I would be saying that government should cut stamp duty, and to really seriously look at the way the local councils impinge on planning and zoning requirements and really try and address the supply side issues that are pushing the prices up, rather than more tinkering on the demand side.
“I don’t know if we want the Commonwealth in that segment of the market. I think we need much more action on the supply side not the demand side not just for first home buyers but for all homeowners. The big problem here is that supply side restrictions have driven up prices so high.
‘There’s a need to deal with house price affordability, and there’s a problem for first homeowners. The problem is when you start looking at expanding the reach of the loans to people who are on social security rather than questioning, there’s a lot of risk involved in that process and that social engineering is one of the things that caused problems in the US.”
Source：news.com.au
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