Savings

The government’s Super Home Buyer program explained: Is it a good idea?

If re-elected, the Coalition will offer first-time home buyers the opportunity to invest up to 40% or $50,000 of their retirement pension to purchase a home.

Under the Super Home Buyer Scheme beginning July 1, 2023, first-time home buyers will be able to invest up to 40% of their retirement pension or up to a maximum of $50,000 to help buying their first home.

The Coalition notes that this will mean Australians will be able to buy their first home earlier by reducing the time it takes to save a down payment by an average of three years.

Recent research from Domain found Australians wanting to enter the real estate market for the first time will need to save up to eight years to pay a 20% down payment on a modest property.

The scheme would apply to new and existing homes, with the amount invested to be returned to the first home buyer’s superannuation fund when the home is sold, including a share of any capital gains.

Prime Minister Scott Morrison said super should be tapped to support the aspiration of many thousands of families who want to buy a home.

“This [the scheme] uses the money that is currently locked away to transform the lives of a family, with the money then responsibly returned to the super fund when the house is sold,” the Prime Minister said.

Superannuation Minister Jane Hume said it was a two-for-one win for Australians – a home and a return on pension savings.

“The superannuation is there to help Australians in their retirement, and the Super Home Buyer Scheme will ensure that Australians can use those savings they accumulate responsibly to improve their quality of life now and their standard of living in the future. retirement,” Ms. Hume said.

Speaking to Patricia Karvelas of ABC’s RN Breakfast on Monday, Ms Hume revealed that a ‘bump’ in house prices is expected if the Coalition is to win the election and the scheme must come into play .

“I imagine a lot of people would present their decision to buy a house,” Ms Hume said.

“So I would imagine that in the short term you would see an increase in house prices – but that doesn’t play into the long term benefits of more ownership and fewer people depending on rent. .”

Federal Labor has rejected this policy, supporting its own split-equity regime.

Is breaking your nest egg worth it?

Super Australia warns that the extra money Australians can take out of the super through the scheme would almost immediately be swallowed up by house price spikes.

Superbody modeling revealed using this scheme could increase median property prices in the country’s five major capitals by 8-16%.

This analysis is based on an assumed program uptake rate from a combination of National Consumer Sentiment Survey results and observed early release COVID super program uptake.

ASFAanalysis.JPG

Source: Industry Super Australia

Industry Super Australia notes that by taking advantage of the scheme should it become available, many potential buyers would soon be locked out of the supercharged market, while others would be bundled in with much larger mortgages.

Super Australia chief executive Bernie Dean said the super is for people’s retirement, not to drive up house prices and push back the dream of home ownership.

“Tossing super into the housing market would be like throwing gasoline on a bonfire – it will drive up prices, inflate young people’s mortgages and increase the old-age pension, which taxpayers will have to pay,” said Ms. Dean.

“Not only will this lock young people into hugely inflated mortgages with no requirement for their own deposit, but it will torpedo the returns on investment for everyone, resulting in everyone having far less in retirement.”

Eliza Owen, head of research at CoreLogic Australia, said first-time homebuyer activity has always been high when homeownership schemes are enacted.

“This is a very difficult time to further stimulate housing demand in the face of supply-side constraints,” Ms Owen said.

CoreLogicAnalysis.JPG

Source: CoreLogic Property Pulse

Despite the supply constraints currently strangling the Australian property market, Ms Owen notes from ABS data that the real value accessible through this scheme is relatively low for the typical young first-time home buyer.

“First-time home buyers are generally younger, and the median super balance was only $25,000 for those between the ages of 25 and 34. At 40%, the program would only offer $10,000 at the level median, or the equivalent of homeowner subsidies,” she said.

“Data from CoreLogic shows that the current median value of homes in Australia is $748,635, meaning the program could help increase the size of a standard deposit by around 1%.

“Those who would be able to withdraw up to $50,000 would have retirement balances of $125,000. no income cap associated with the Super Home Buyer Scheme, which makes it much more advantageous for young first-time buyers with higher incomes.”

Head of loans at non-bank lender WLTH, Catherine Mapusua, echoes that sentiment, saying the program will help those who already have a secure financial future, but can help prepare for the interest rate uncertainty that could watch them.

“AAs interest rates are expected to continue to rise in the near future, the need for a large deposit is further emphasized to avoid mortgage stress from overwhelming loan repayments,” Ms Mapusua told Savings.com.au .

“The availability of the Super Home Buyer program will allow buyers to retain some of their cash savings, which will act as a buffer or safety net for proposed interest rate increases.

“While this grant will not directly rectify the [demand and supply] problem to be solved, it is good to see another program made available to Australians.”

Am I eligible?

The scheme will only come into play until the Coalition wins the federal election, which is being held on Saturday, May 21.

The program would then begin on July 1, 2023.

Eligibility criteria include:

  • Available only to first-time buyers who have separately saved at least a 5% deposit.
  • Available to first time buyers of any income.
  • Each person in a couple can access the device if they are eligible.
  • Applies to new and existing homes.
  • Applies to any property price.

Are you buying a house or looking to refinance? The table below shows home loans with some of the lowest interest rates on the market for homeowners.



Lender


Variable More details
UNLIMITED WITHDRAWALSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable – 2 years (LVR
  • Fast turnaround times, can meet 30 day settlement
  • For purchase and refinancing, down payment min 20%
  • No ongoing or monthly fees, add 0.10% compensation

Variable More details
100% COMPLETE CLEARING ACCOUNTNO APPLICATION FEES OR ON-GOING FEES

Low Rate Home Loan – Premium (Principal & Interest) (Owner Occupant) (LVR
  • No upfront or ongoing fees
  • 100% cleared account
  • Additional refunds + withdrawal services

Variable More details
ZERO APPLICATION FEESCOMPENSATION WITHOUT COST

Homeowner Accelerates – Celebrate (LVR
  • We lower your rate based on the amount you have repaid on your loan
  • Automatic Fare Matching
  • No upfront or ongoing fees

Variable More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees – None!
  • Unlimited additional refunds
  • Easy online application, quickly find out if you are approved!
  • Redraw – Access your extra payments if you need them
  • Use the app for loan information to help you pay off your home loan faster

Careful variable real estate loan (capital and interest) (LVR
  • No ongoing fees – None!
  • Unlimited additional refunds
  • Easy online application, quickly find out if you are approved!
  • Redraw – Access your extra payments if you need them
  • Use the app for loan information to help you pay off your home loan faster


Basic criteria: a loan amount of $400,000, variable, fixed, principal and interest (P&I) real estate loans with an LVR (loan-to-value) ratio of at least 80%. However, the “Compare mortgages” table allows calculations to be made on the variables selected and entered by the user. All products will list the LVR with the product and price list which is clearly published on the product supplier’s website. Monthly repayments, once the basic criteria are modified by the user, will be based on the advertised prices of the selected products and determined by the loan amount, the repayment type, the loan term and the LVR as entered by the user. user/you. *The comparison rate is based on a loan of $150,000 over 25 years. Please note: this comparison rate is only true for this example and may not include all fees and charges. Different terms, fees or other loan amounts may result in a different comparison rate. Rates correct as of May 16, 2022. See disclaimer.


Image by Ashin K Suresh via Unsplash

The whole market has not been taken into account in the selection of the above products. Instead, a reduced portion of the market was considered. Products from some vendors may not be available in all states. To be considered, the product and price must be clearly published on the product supplier’s website. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au and Performance Drive are part of the Savings Media group. In the interest of full disclosure, Savings Media Group is associated with Firstmac Group. To learn how Savings Media Group handles potential conflicts of interest, as well as how we are paid, please visit the website links at the bottom of this page.