Home Loan Scheme Could Drive Up Prices, Warns Insurance Body
Home Loan Scheme Could Drive Up Prices, Warns Insurance Body
0
A new federal scheme, designed to lower the demand for lenders’ mortgage insurance (LMI), may inadvertently escalate home prices and hinder lower-income earners' ability to purchase property, according to concerns raised by Australian insurers.
The Home Guarantee Scheme, set to expand in October, offers first-time buyers the opportunity to bypass the usually required LMI if they have managed a deposit of just 5%.
The Australian government anticipates that the scheme will help buyers save around $1.5 billion in LMI premiums in its first year. However, the Insurance Council of Australia (ICA) is warning that the initiative might leave first-time buyers economically disadvantaged due to heightened house prices. According to ICA CEO Andrew Hall, anticipated price rises could surpass the savings resulting from avoiding LMI, ultimately hindering first-time homeownership.
The ICA points out that on a typical $700,000 home, the initiative can save purchasers between $21,000 and $28,000 on LMI. However, the expected escalation in house prices—ranging from $37,100 to $69,300—could leave buyers financially behind by $16,100 to $41,300.
Hall advocates for more targeted aid, recommending measures such as asset testing for scheme recipients, transparent risk assessments, and systematic program reviews to ensure the scheme primarily aids those in true need. Without these adjustments, the program might primarily assist buyers who could already access property without assistance. This risks only marginally increasing home ownership rates from 66% to 67.2% over the next five years.
According to analysis by Lateral Economics, expanding the scheme may increase national property values by 3.5% to 6.6%, potentially pricing out up to 6,500 lower-income buyers in its initial phase, with the most significant impacts on homes priced near the scheme's limits, which will rise to $1.5 million in some urban areas.
Liberal housing spokesman Andrew Bragg criticised the scheme as a radical move that could transform the government into a de facto universal property insurer, potentially exposing taxpayers to substantial financial risks. He also voiced concerns that the initiative effectively nationalises lenders’ mortgage insurance for first-time buyers, arguing it might disproportionately benefit the wealthy.
Amidst widespread discussions, Prime Minister Anthony Albanese defended the scheme, emphasising its potential to reduce the deposit timeframe by up to six years, potentially saving buyers about $25,000 on mortgage insurance. Albanese reiterated the government's commitment to reducing barriers for first-home buyers as part of their electoral promise.
Published:Wednesday, 27th Aug 2025 Source: Paige Estritori
Australian real wages have hit a challenging plateau, currently trailing 6.1% below their mid-2022 'covid-bubble' heights. The Reserve Bank of Australia's (RBA) recent Statement of Monetary Policy provides little solace, projecting that real wages will stay 5.5% beneath their peak by the close of 2027. This comes amidst SEEK's latest advertised salaries index, which paints a picture of slowing wage growth. - read more
The latest inflation figures from the Australian Bureau of Statistics have disrupted expectations for a rate cut by the Reserve Bank of Australia (RBA) in September. July's monthly CPI inflation escalated to an annual rate of 2.8%, rising significantly from June's 1.9% and outstripping forecasts from multiple market analysts. This unexpected inflationary surge is mainly attributed to a dramatic 13.0% hike in electricity prices and robust travel costs. - read more
A new federal scheme, designed to lower the demand for lenders’ mortgage insurance (LMI), may inadvertently escalate home prices and hinder lower-income earners' ability to purchase property, according to concerns raised by Australian insurers. The Home Guarantee Scheme, set to expand in October, offers first-time buyers the opportunity to bypass the usually required LMI if they have managed a deposit of just 5%. - read more
The Australian federal government has announced an earlier implementation of its expanded program guaranteeing low-deposit loans for first-time home buyers, set for October. This program aims to eliminate the need for lenders' mortgage insurance (LMI) by allowing first-home purchasers with just a 5% deposit to enter the market. Previously planned for next year, the revamped policy also removes income caps and raises property price limits. - read more
A significant financial shift is on the horizon for Australian households. After years of stringent budgeting, new data suggests a revitalisation in household spending, thanks to recent interest rate cuts and tax relief measures introduced last July. - read more
Jet skiing is a thrilling watersport that has become increasingly popular in recent years. If you’re thinking of purchasing a jet ski, you may be wondering how to finance your purchase. There are a few different ways to finance a jet ski, and the best option for you will depend on your individual circumstances. - read more
If you’re looking to finance a new or used jet ski, you may be wondering if it’s possible to get a loan with bad credit. The short answer is yes – and it may be easier than you think, but there are a few things you need to know before you start the process of applying for a loan. - read more
Embarking on the watersport lifestyle can be a thrilling experience, but jet skis, with their cutting-edge features and high-performance capabilities, come with a price tag to match. For many enthusiasts, financing is a practical method to spread out the cost of a jet ski purchase over time, making it more accessible and manageable. - read more
Welcome to our guide on jetski loans! Whether you're a thrill-seeker or simply love spending time on the water, owning a jetski can be an exciting adventure. - read more
Jet skiing is an exhilarating water sport that many Australians enjoy, especially during the warmer months. With the vast and beautiful coastline that the country offers, it's no wonder that jet skis are becoming a popular addition to many households. - read more
Knowledgebase
Debt-to-Equity Ratio: A measure of a company’s financial leverage, calculated by dividing its total liabilities by stockholders’ equity.
