First home saver accounts becoming more popular
The government’s First Home Saver Account (FHSA) incentive is finally gaining traction among first-home buyers, with a 56% rise in new accounts in the June quarter, according to the latest figures from the Australian Prudential Regulation Authority.
Over the first six months of 2011, the scheme attracted more than 6,000 account holders, and account holder numbers are up 95% since September 2010.
As of June, 2011, nationwide there were 31,000 open FHSA, containing a total of $230 million. This figure is still just a fraction of the 220,000 first-home savers projected to open accounts by 2009 and is unlikely to ever reach the 2012 target of 700,000.
The take up of the savings scheme was clouded by the First Home Owner Boost scheme, which ran from October 2008 to the end of 2009 and encouraged first-home buyers to purchase a home sooner rather than save.
The increase has come despite the Commonwealth Bank, the nation's largest home lender, dumping the scheme in August, leaving the ANZ as the only major bank to offer the savings accounts. Only 18 financial institutions offer the accounts, mostly credit unions.
The scheme aims to help first-time buyers save for a deposit for their first homes. Under the FHSA, the government contributes 17% on the first $5,500 of individual contributions made each year. Account holders are required to keep savings in the FHSA for four financial years before they can use the funds to buy a home.
The government amended the scheme on May 25 to allow savings in an account to be paid into an approved mortgage after the end of a minimum four-year qualifying period, rather than requiring the money to be paid into a superannuation account.
Under the original policy, if the account holder bought a home before the end of that four-year period, the balance of their account was required to be transferred into the borrower’s superannuation fund so that it remained in a concessionally taxed environment.
“We believe further improvements to the scheme to make it more flexible that were passed by federal parliament earlier this year are helping to boost interest in FHSA,” says Dean Rushton, chief operating officer at mortgage broker Loan Market.
Rushton says previous Loan Market surveys found consumers had been confused about the scheme and believed it was too restrictive.
“While we have seen some lenders recently remove their interest in the scheme, there still remains substantial support from the government to help potential buyers save towards a home loan deposit,” he says.
The FHSA was launched in October, 2008 with an original target of assisting 700,000 people in its first four years of operation.
“The fact remains this is a positive initiative and it needs to continue to increase its exposure. Loan Market certainly encourages people looking to enter the property market to consider the FHSA,” Rushton says.
The property FHSA recipients buy must be their main residence for a continuous period of at least six months. The six-month period must start within 12 months of becoming the owner of the home, meaning buyers could rent out the property during the first 12 months or after living in it for six months.
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