Participants Average $82k of Equity in Home Guarantee Scheme since 2020

Data from a collaboration between Commonwealth Bank and the NHFIC has unveiled that first home buyers in the NHFIC’s Home Guarantee Scheme have made an average of $82,000 equity in their home purchases since 2020.

The growth runs in line with long term averages, but the affordability of homes purchased through the program well outperforms first home buyers in the mainstream market.

Deposits required of first home buyers in the Home Guarantee Scheme (HGS) are still much the same as they were back in 2020, anchored in property price caps, but other first home buyers in the market are paying up to 50 percent more.

According to the report, deposits paid by HGS participants have risen only $1200 in the three years from 1 January 2020 to 31 May 2023. But first home deposits in the rest of the market have increased from $108,400 up to $159,000. 

NHFIC Head of Research Hugh Hartigan said that it’s promising to see positive equity growth, even among multiple rate rises.

“Despite the challenging interest rate environment and dwelling price falls last year, it is encouraging that the (average) equity position of Home Guarantee Scheme participants appears to be holding up. 

“It is also interesting that deposits for first home buyers outside of the HGS have risen so strongly, which may indicate they have other ways of supplementing their savings,” said Mr Hartigan.

Affordability was a common feature of the report, with HGS participants also reportedly taking out smaller loans than broader market first home buyers. 

Since 2020, their loan sizes only increased an average of 4.7 percent, compared to other first home buyers who’s loans increased 13.4 percent.

And because HGS participants tended to purchase in the more affordable markets, they largely avoided substantial falls in home values last year. They experienced an average decline of 1-2 percent compared to the rest of market declines of 5-8 percent.

It’s good news for first home owners who’ve been afforded a foot in the door by the program, during a time when property prices were on the edge of an unexpected boom.

NHFIC Chief Program Officer Home Ownership Jennifer Chew said the insights are testament to the importance of the program.

“NHFIC is proud to work collaboratively with major banks to further understand the value of the Home Guarantee Scheme,” said Ms Chew.

“This research demonstrates the benefits of the HGS in helping more Australians into homes. 

“We are proud to have helped over 100,000 people into homes, and with the recent expansions to the eligibility criteria and Participating Lender panel, we hope to continue to help many more.”

Additionally, the HGS has been responsible for affording single women an entry point to home ownership, with more single women participating in the scheme compared to men. This trend is reversed in the mainstream market. 

Single women with dependents are even more represented in the Family Home Guarantee, making up 80 percent of participants.

The HGS helps more people into home ownership by partnering with participating lenders to allow eligible home buyers to purchase with as little as a 5 percent deposit. The government then guarantees the remainder of their deposit, so participants aren’t required to pay lenders mortgage insurance.

As it’s a guarantee and not a grant, it does however mean that participants are required to take out a larger portion of the home value as a mortgage. This means that repayments are larger than if they had paid a 20 percent deposit.

It’s a valuable tool in opening the door for more Australians to home ownership, as house values start to rise again and affordability dwindles.

The Home Guarantee Scheme will continue to help modest income earners into home ownership, with another 50,000 places across three different guarantees announced from the 1st of July this year.