from pundits and pollies alike.
The expanded deposit guarantee, which removes the need for Lenders Mortgage Insurance (LMI) increases purchase thresholds in line with underlying price growth, and is now unlimited in quantity. It also now removes prior caps on income levels.
Important to note: it doesn’t change loan servicing checks, meaning it shouldn’t expose buyers to borrowing more than they can afford. It lets them buy in earlier with a lower deposit, and slightly cheaper without paying LMI.
On balance, a welcome expansion of an existing policy (first started in the Scomo days) which reduces the deposit hurdle facing otherwise serviceable new home buyers (5% for most, 2% for single parents).
Pundits rightly point out that the expanded Guarantee Scheme will be highly inflationary without also increasing #housing supply to match.
The pollies are out there all over the media trying to sell it as an amazing change that will solve the #housingcrisis. Hint: it won’t, not even close.
You see, for all the talk about increasing housing supply, National approvals and commencements remain around the same, low, levels as three years ago when the #housingaccord was announced in October 2022. See my post from yesterday (will link below).
In fact, approvals in the largest two states – VIC and NSW – remain well below those levels from October 2022.
So in short: ✅Buyers buying sooner, without LMI + ❌Not enough new housing to keep up = Existing house prices go 🚀. New housing remains 🐌