Westpac will offer mortgage loans backed by the federal government’s Home Guarantee Scheme, as part of its broader drive to support housing affordability.
From July 1, eligible home buyers will be able to apply for a Westpac home loan with a deposit of between two and five per cent of the property’s value without paying Lenders Mortgage Insurance, under the National Housing Finance and Investment Corporation (NHFIC) scheme.
That represents a significant potential saving on the 20 per cent deposit normally required to avoid having to purchase LMI.
The scheme is specifically targeted at first home buyers struggling to get on the property ladder, with part of the home loan guaranteed by NHFIC on behalf of the Australian government.
“First home buyers have been the most impacted by rising interest rates, and therefore this is really important in helping this group of customers get access to housing,” said Richard Burton, managing director of Westpac’s mortgage business.
First home buyer numbers hit their lowest levels since 2017 earlier this year, according to Australian Bureau of Statistics data, although they have since recovered somewhat.
The bank’s participation in the scheme aligns with its broader strategy to increase access to housing for all Australians, Burton said. Other recent initiatives include extending the LMI waiver initiative to registered nurses and midwives, and the bank's partnership with Head Start Homes.
Westpac has three guarantees available to customers under the scheme: The First Home Guarantee and Regional First Home Buyer Guarantee will support eligible first home buyers with a deposit of as little as 5 per cent, while the Family Home Guarantee supports eligible single legal guardians with at least one dependent child to buy a home with a deposit of as little as 2 per cent.
The government has broadened the eligibility criteria for the scheme so that, from July, friends, siblings, and other family members will be eligible for joint applications under the First Home Guarantee and the Regional First Home Buyer Guarantee. These guarantees had previously been restricted to people that were married or in a de facto relationship, in addition to single applicants.
The guarantees are also now available to non first home buyers who haven’t owned a property in Australia in the last ten years.
The offer is initially available for Westpac and RAMS customers, with Westpac Group’s other banking brands to offer the guarantees later in the year.
“This offer is targeted at low-income earners, to enable them to access home ownership sooner because they won’t have to save for a 20 per cent deposit,” said Mirella Gallace, Westpac’s head of product and servicing, mortgages.
“They also won’t need to pay for insurance, so there’s a significant reduction in overall costs.”
Around one in seven first home buyers were supported by the NHFIC scheme in 2021/22 and Gallace said Westpac was expecting significant interest in the offer.
Burton said that demand for home loans in the broader market remained robust, despite the RBA’s aggressive series of interest rate hikes, and that was reflected in house prices resuming an upward trajectory.
Westpac’s home loan business was also performing well, he added, noting there had been particularly strong interest in the bank’s digital mortgage offer, which was rolled out last year.
“We do appreciate that cost of living pressures are impacting our customers, and for those with a home loan, those additional repayments do put more burden on the household budget,” Burton said. “But the vast majority of customers are coping well.”
He reiterated that the bank was ready to help any customer that was experiencing difficulties and recommended they make contact early.
Westpac is also offering up to $2,000 back on Westpac Home and Contents Insurance policies provided by Allianz. The offer is available with Westpac home loans supported by the Regional First Home Buyer Guarantee or Family Home Guarantee, applied for from now until September 30, 2023 and settled by December 31, 2023. More details on this insurance offer can be found on Westpac’s website.
By Ben Young
Head of Fraud and Financial Crime Insights