FHB reforms plagued by uncertainty

Prior to the federal election, which saw the Coalition re-elected to government, Prime Minister Scott Morrison announced the Coalition’s First Home Loan Deposit Scheme (FHLDS).

The $500-million scheme is designed to provide first home buyers (FHBs) earning up to $125,000 ($200,000 for couples) with “a significant leg up” by making available to them 95 per cent loan-to-value ratio mortgages should they have a deposit of at least 5 per cent. 

The implementation of the scheme is to be administered by the National Housing Finance and Investment Corporation (NHFIC), which commenced “detailed” consultations with lenders regarding their “potential participation” in the scheme in September.

However, appearing before the Senate estimates committee, NHFIC CEO Nathan Dal Bon revealed that the government is yet to provide the body with further information regarding how the scheme is to be administered.

When asked if he knew whether property price caps had been set to restrict access to low-deposit loans, Mr Dal Bon said that while the NHFIC has engaged with government regarding the question, it has not yet received a definitive response.   

Mr Dal Bon noted that the price caps would influence the level of demand for the scheme from the FHB segment.  

“We need to obviously have clarity around the house price thresholds, and that will obviously impact on the degree of demand as well,” he said.

Mr Dal Bon also told policymakers that the NHFIC is yet to narrow the pool of lenders that would supply credit to FHB applicants.

“To date, we’ve had a market sounding exercise and that process has concluded,” he said.

“The information that has come out of that market sounding exercise will help inform a procurement process that NHFIC will conduct to determine a panel of lenders. 

“That procurement process hasn’t started yet.”

Despite passing the Senate last week, the bill to establish the scheme has been heavily scrutinised by policymakers.  

Senator Murray Watt recently told the Parliament that the current bill does not stipulate crucial details surrounding specific eligibility requirements, locality-based price caps, and loan allocations processes.

“[T]he bill in front of us does not have any real detail of the scheme,” he said.

Mr Watt used this reasoning to suggest the bill be amended with a shorter review period of 12 months, which was agreed on, and the bill was amended.

Independent senator Jacqui Lambie also had concerns on the lack of information provided on the mechanisms of the scheme, and the fact that these details will be decided upon without the scrutiny of Parliament.

“Treasury and NHFIC, the body that will provide the guarantees, told the committee that they are continuing to consult with stakeholders to refine the details of the scheme,” she said.

“A close read of the bill shows many of these key details will be formally set at a later date through a ministerial direction that is not disallowable by Parliament.”

She went on to say: “Retaining parliamentary scrutiny over key aspects of this scheme is important.”

Greens senator for NSW Mehreen Faruqi shared a similar sentiment on how the bill has been passed through Parliament.

“Core elements of the proposed scheme are totally missing from the bill. There is no detail on funding appropriation, the number of guarantees to be issued or eligibility; no legislated annual caps; and no price cap on homes or loans that will be guaranteed,” Ms Faruqi said.

“What’s more, the government wants to leave this crucial detail of the scheme to non-disallowable regulation, which means that Parliament will never be able to scrutinise the details of this proposed scheme.”

One Nation senator Malcolm Roberts said: “[W]e are voting to set up a scheme that we do not know how it will operate and over which we have no supervision.”

[Related: ‘Devil’s in the details’: Senators scrutinise FHB scheme]