Federal Budget 2022: Who benefits?
The Federal Government last night announced the 2022 Federal Budget with a big focus on counteracting the impacts of escalating costs of living and house prices.
The schemes announced are targeted at helping Australians with the challenges of building up a house deposit through the expanded Home Guarantee Scheme and assisting with costs to households.
The move comes after a Property Council of Australia survey found one-in-five people who wanted to enter the property market believed it was beyond their financial capacity. Some 90% of 1,110 respondents said high prices were the biggest barrier to buying their first home.
First Home Guarantee
A total of 35,000 First Home Buyers will benefit from the Government’s decision to extend the First Home Guarantee (previously the First Home Loan Deposit Scheme). The Treasurer, Josh Frydenberg, said the Government had helped 160,000 people purchase their first home since last year.
The scheme enables eligible first-home buyers to avoid Lenders Mortgage Insurance (LMI), which is often compulsory for buyers with less than a 20% deposit.
Eligible buyers only have to commit 5% of a 20% deposit, and the Federal Government will guarantee the gap.
LMI protects a lender from a customer defaulting but can cost buyers tens of thousands of dollars.
The new scheme has the following price caps for each state and territory:
- NSW: $800,000
- Victoria: $700,000
- Queensland: $600,000
- Western Australia: $500,000
- South Australia: $500,000
- Tasmania: $500,000
- ACT: $500,000
- Northern Territory: $500,000
To qualify, individual applicants must earn less than $125,000 annually, while joint incomes for couples must total less than $200,000.
Family Home Guarantee
The Family Home Guarantee was also extended to now offer 5,000 places each year. This scheme is targeted at single parents and will help them purchase with as little as a 2% deposit. The Government will guarantee the gap between their down payment and the full 20% deposit to help them avoid paying for LMI.
While this isn’t a large number of places, it may provide more stability for some families, particularly as rents across Australia rose 15.3% since the pandemic.
It is important to note that lenders will still heavily scrutinise a potential borrower’s capacity to service a loan before approving, especially if they have multiple dependants.
Regional Home Guarantee
The Regional Home Guarantee will offer a similar mortgage guarantee for applicants who build or buy brand new homes in country regions.
It is aimed at helping 10,000 first-home buyers and those who have spent five years on the rental cycle to build or buy a newly built home outside the metropolitan markets.
This is expected to help attract new migrants to regional areas, boosting economic activity beyond the capital cities, and assist long-term locals to compete for properties amidst an increase in sea and tree-changers moving from metropolitan areas.
The scheme is expected to commence in October.
Reduced household costs
Additional measures were announced to reduce costs to households including cuts to fuel prices and increased childcare subsidies.
The Government said it would halve the fuel excise for six months, from 44 cents to 22 cents per litre, saving approximately $15 on the average price of a tank of petrol.
Increased childcare subsidies were also brought forward, which the Government said would leave the average family $2,200 a year better off.
Low- and middle-income earners will receive a boost with a one-off $420 payment available from July. The low- and middle-income tax offset has also been extended for another year, potentially adding $1,500 back in Australians’ pockets when they complete their tax return.
Around six million pensioners, carers, veterans, job-seekers and eligible self-funded retirees will be eligible for a $250 cash payment.
If you want to know where you fit with the Home Guarantee Scheme or to understand your options when it comes to purchasing or refinancing property, speak to a Loan Market broker.
Disclaimer: This document has been created by Loan Market Pty Ltd (ABN 89 105 230 019, Australian Credit Licence number 390222). It provides an overview or summary only and it should not be considered a comprehensive statement on any matter. You should before acting in reliance upon this information seek independent professional lending or taxation advice as appropriate specific to your objectives, financial circumstances or needs. Information included has been sourced from third parties and has not been independently verified. Accordingly, Loan Market Pty Ltd is not in any way responsible for nor provides any warranty express or implied as to its accuracy or relevance. It’s important to note the budget proposals are not yet legislated and are subject to change or defeat in the Australian Parliament.