Supporting first home buyers is in our DNA

The First Home Loan Deposit Scheme is making home ownership a reality for thousands of Australians who once thought this was an unattainable dream. CUA is excited to be supporting the scheme, which builds on our long and proud history of finding innovative ways to help everyday Australians to access finance and buy their first home.

Few purchases in life are quite as emotional as buying a home. Of course there are rational factors at play in deciding on a home - the distance to public transport, the nearest school, the size of the bedrooms, the amount of maintenance or upkeep required. However, it also comes down to the ‘feeling’ you get when you walk inside, being able to visualise your furniture and your family, inside the home or playing in the backyard.

CUA members Michael and Rachel Gregory know how ‘emotional’ it is to become first-time homeowners, after recently relocating from Sydney to the Sunshine Coast to their dream home. Watch their story.

Sadly for many young Australians, home ownership has been steadily slipping out of reach in recent years, as housing affordability deteriorates.

Only last month, the Demographia International Housing Affodability Survey confirmed that Sydney and Melbourne are in the top five least affordable cities in the world, coming in at 3rd and 4th position respectively, behind Hong Kong and Vancouver. The median house price in Sydney is now 11 times the median household income, while for Melbourne it is 9.5 times.

Now let’s cast our minds back to the 1980s – to a time when many of today’s first homebuyers were still in nappies. Yes, interest rates were sky-high, consistently in double digits, but the median house price in Australia was only around three times the median income. 

The widening gap between wage growth and house prices means today’s first homebuyers face an uphill battle to save a deposit not just in our most expensive housing markets, but right across Australia. Saving 20 per cent of the purchase price – which equates to $120,000 towards a $600,000 apartment – is no easy feat. And unless buyers can save at least a 20 per cent deposit, they also face the prospect of tens of thousands of dollars in lenders’ mortgage insurance. This insurance covers the lender (ie. the bank) if the borrower defaults on the loan. For many buyers this added expense prompts them to defer buying until they have a larger deposit and can avoid incurring the cost.

While credit unions like CUA can’t do much to influence house prices, we do have an important role in supporting innovative solutions to help first home buyers into the market, no matter how insurmountable the barrier might seem.

So why is that? Surely it makes more business sense to lend to those with bigger deposits, higher disposable incomes or more equity in their existing property?

In reality, it is in our DNA as a credit union, or member-owned banking provider, to help provide responsible finance to those people that might not be able to access traditional avenues for a loan. It is what we have been doing for nearly 74 years.

Long before neobanks, fintechs or peer-to-peer lenders emerged, credit unions were the earliest ‘banking disruptors’.

CUA traces our roots back to Australia’s earliest credit union, which was founded in Sydney in 1946. Credit union pioneer Kevin Yates believed co-operative banking had the ability to give people at the bottom of the socio-economic ladder (at that time, the Catholic working poor) a chance to better themselves, lending money based on character rather than assets. Community members came together, pooled their money and essentially started their own credit unions and building societies, lending to each other. These members who invested money into the credit union were both its owners and customers.

Fast forward to 2020 and CUA’s participation in the First Home Loan Deposit Scheme is essentially continuing this legacy of helping people access responsible finance to buy a home, even if traditional banking options might not have been suitable.

The Australian Government scheme provides a guarantee for eligible first home buyers to purchase a home with a minimum 5 per cent deposit, without needing to pay for lenders’ mortgage insurance. The Government is supporting up to 10,000 loans each financial year.

CUA  is also supporting other innovative ways to help first homebuyers into the market, including through the BuyAssist program led by the National Affordable Housing Consortium. The program helps eligible buyers on lower incomes to buy a home by securing investors to provide the deposit, while lenders like CUA provide the balance of the purchase price in a ‘shared equity’ arrangement.

While it is early days for the First Home Loan Deposit Scheme, the level of interest from homebuyers suggests it’s been well received by homebuyers. And at the end of the day, any initiative that helps Australians to realise their dream to become homeowners much sooner is something that CUA is proud to be involved in.

Ready to buy a home? Learn more about how CUA can help you get on to the property ladder sooner via the First Home Loan Deposit Scheme at www.cua.com.au/firsthome  

Paul Lewis is the CEO of Australia’s largest credit union, CUA, which provides banking, health insurance and general insurance to over 550,000 Australians. You can follow Paul on Twitter @CUACEO