Trending Financial News 13 September 2019

First Home Buyer Loan Deposit Scheme is coming soon

The First Home Loan Deposit Scheme legislation will be introduced to parliament today to enable the scheme to begin on 1 January 2020. 10,000 borrowers per year will benefit from government guarantees for lenders so they can avoid paying for Lenders Mortgage Insurance.

The National Housing Finance and Investment Corp is consulting with lenders and will establish a panel of lenders.

“smaller banks and non-bank lenders will be prioritised to encourage competition.”

Who will be eligible for the First Home Loan Deposit Scheme?

The First Home Loan Deposit Scheme will start on 1 January 2020 with the legislation to enable the scheme introduced to parliament this week. The First Home Loan Deposit Scheme will provide loan guarantees for 10,000 borrowers per year.

The National Housing Finance and Investment Corp said: “The property price of eligible homes will be determined on a regional basis, to ensure that benefits of scheme participation are spread across the country.”

“Given the limited supply of guarantees (10,000 only per year), the potential financial benefits for successful applicants, and the relatively high income eligibility thresholds, it is likely that there will be a large pool of eligible borrowers.

So the NHFIC said it was consulting with industry to determine how the 10,000 annual guarantees should be allocated.

Which bank will lend the most money to me?

A ‘shadow shopping’ study by Macquarie Securities found that the loan amount mortgage lenders are prepared to approve for a particular level of income and expenses varies widely, by as much as 27 per cent for owner occupiers and 48 per cent for investors.

Macquarie found that for a single owner-occupier loan applicant with income of $105,000, rent of $1300 per month, living expenses of $1200 a month, no personal loans and a credit card with an $11,000 limit, ANZ will offer a loan of $561,000. Commonwealth Bank will offer $695,000, NAB offered $699,000 and Westpac offered $669,000.

Credit card debt is under control

Buy now, Pay later products and high credit card interest rates may be pushing Australian consumers away from credit cards. The Reserve Bank reported that the number of credit cards on issue was 14.5 million in July, down 2.3 per cent over 12 months.

Credit card balances accruing interest stood at $28.7 billion in July, down 6.6 per cent over 12 months. Debit cards are increasingly popular. There were 624 million debit purchase transactions in July – the highest figures ever.

First home buyers are back in the market

The value of home loans approved for first home buyers increased by 20.9 per cent in July according to an analysis of the latest Lending to Households and Businesses data from the Australian Bureau of Statistics (ABS) by CoreLogic research analyst Cameron Kusher.

The value of housing finance commitments for owner-occupier first home buyers (FHBs) totalled $3.7 billion in July, up 20.9 per cent from June, reported Mortgage Business.

In the ACT, first home buyer loan sales were up 76.4 per cent, in NSW FHB loans went up 33 per cent with other major states also recording significant growth.

In Tasmania and South Australia the value of FHB loans declined.

Teachers Mutual Bank wants to be Australia’s socially responsible bank

Teachers Mutual Bank’s wholesale short-term deposits have been certified as ethical investments by the Responsible Investment Association Australasia (RIAA). TMB is the first Aussie bank to offer ethical short-term deposits for wholesale investors.

This means that TMB deposits are excluded from being reinvested in 14 different categories, including tobacco, gambling, armaments, fossil fuels, or any large-scale greenhouse polluting activities.

TMB CFO Glenn Sargeant told The Advisor that TMB is the only Australian bank with retail deposits, mortgages and wholesale funding all certified as ethical and responsible.

“Our aim is to be the most socially responsible bank in Australia.”