First Home Loan Deposit Scheme: What Buyers Need To Know

The government’s first home buyer loan deposit scheme finally kicked off this week. Under the scheme, 10,000 Australians will receive a government-backed home loan with as little as a 5% deposit, and no requirement to pay lenders mortgage insurance (LMI). Here’s what you need to know.

In December last year, the National Housing Finance and Investment Corporation (NHFIC), a department created to manage the government’s new First Home Loan Deposit Scheme (FHLDS), announced that 27 lenders had been approved to provide guaranteed home loans to First Home Buyers (FHBs).

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FHBs have been patiently awaiting the scheme’s launch since it was announced before the Federal Election earlier this year. This is because it is the first of its kind to help eligible FHBs purchase a home with a deposit as little as 5 per cent.

Who are the 27 approved lenders?

The 27 lenders are comprised of two ‘big four’ lenders, and 25 non-major lenders.

The two major lenders, National Australia Bank and Commonwealth Bank, will get a head start in the application process, with approval to offer loans from 1 January 2020. The remaining 25 non-major lenders on the other hand, will be able to submit applications from 1 February 2020.

As confirmed by the NHFIC, the 27 approved Australian lenders participating in the Scheme are as follows:

• National Australia Bank
• Commonwealth Bank of Australia
• Australian Military Bank
• Auswide Bank
• Bank Australia
• Bank First
• Bank of us
• Bendigo Bank
• Beyond Bank Australia
• Community First Credit Union
• CUA
• Defence Bank
• Gateway Bank
• G&C Mutual Bank
• Indigenous Business Australia
• Mortgageport
• MyState Bank
• People’s Choice Credit Union
• Police Bank (including the Border Bank and Bank of Heritage Isle)
• P&N Bank
• QBANK
• Queensland Country Credit Union
• Regional Australia Bank
• Sydney Mutual Bank and Endeavour Mutual Bank (divisions of Australian Mutual Bank Ltd)
• Teachers Mutual Bank Limited (including Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank and UniBank)
• The Mutual Bank
• WAW Credit Union

What rates will these lenders offer?

Rates for the guaranteed home loans will most likely be determined on an individual basis, taking into consideration the applicant’s income and expenditure.

However, representative of the NHFIC, Fiona Benson has stated that “all participating lenders are supporting the Scheme by not charging eligible customers higher interest rates than equivalent customers outside of the Scheme”.

If you are looking to apply for the FHLDS, you can look at the current fixed and variable rates available on the market and begin to familiarise yourself with their current offerings.

Variable rate home loans available outside of the FHLDS

Variable rate home loans have an interest rate that can rise or fall over the term of your loan, depending on the state of the market.

Here are the lowest variable rate home loan products currently advertised by 25 of the 27 approved lenders in the First Home Loan Deposit Scheme*:

Fixed rate home loans available outside of the FHLDS

Fixed rate home loans have an interest rate that is fixed for a set period of time, between one and five years, and at the end of this period the loan switches a different rate.

This rate is usually higher than the original fixed rate, so be sure to check the rate it reverts to after the fixed period is up, before you apply.

Here are the lowest fixed rate home loan products currently advertised by 25 of the 27 approved lenders in the First Home Loan Deposit Scheme*:

Indigenous Business Australia, one of the approved lenders, is a government funded organisation that enhances the economic development opportunities of Aboriginal and Torres Strait Islander people across Australia, and details of their loans can be found on their website.

Another lender, Mortgageport, does not make its rates publicly available. Therefore, both lenders have been left off the tables above.

*These rates are current as at 16 December 2019 according to the RateCity database. These rates are not indicative of the rates that will be offered as part of the First Home Loan Deposit Scheme. The lowest rates on the market do not always equate to the cheapest products as fees and charges may apply. Contact the lender directly to request a copy of the Product Disclosure Statement, before you complete any applications, as applying to multiple credit products can negatively impact your credit score.