Capped at 5%: A Proposed Interest-Rate Freeze for First-Home Buyers to Boost Construction

The plan, outlined in the Property Council’s federal election platform, proposes the introduction of a “First Home Buyer Accelerator Loan Scheme.” This initiative could be a game-changer for many Australians looking to get a foot on the property ladder while simultaneously boosting the supply of new homes.

Key Highlights of the Proposal

• Interest Rate Cap for First-Home Buyers: Under the proposed scheme, FHBs would have interest rates capped at either the Reserve Bank of Australia's (RBA) cash rate or 5%, whichever is higher. This cap would apply to those buying newly constructed homes or purchasing off-the-plan properties. The initiative is designed to make home ownership more affordable by reducing monthly mortgage repayments, which would help mitigate one of the most common barriers to buying a first home.

• 50% Government Guarantee for Lenders: In order to lower deposit requirements, the government would provide a 50% guarantee to lenders who agree to reduce the required deposit for first-home buyers to just 5%. This would make it easier for Australians to enter the property market without needing to save a large deposit.

• Savings for First-Home Buyers: Based on current market rates, the proposed cap could lead to significant savings for first-home buyers. Before the RBA’s cash rate rise on 17 February, the average variable mortgage rate stood at 6.51%, with an official cash rate of 4.35%. Under the new scheme, first-home buyers could save up to $1,087 each month, or $13,044 annually, based on these figures.

• Eligibility Criteria: The scheme would be available only to owner-occupiers who are first-time property buyers, with no previous property ownership in Australia.

A Solution to Two Major Housing Challenges

Mike Zorbas, Chief Executive of the Property Council of Australia, argues that this initiative tackles two pressing issues: the struggle to enter the property market and the need for increased construction activity. The policy is seen as a way for the government to use its balance sheet to stimulate housing supply without incurring upfront costs.

“The government can and should use its balance sheet to support first-home buyers and the delivery of new homes,” Zorbas said. He also stressed that the scheme would not expose taxpayers to significant future risks, as it would be subject to appropriate credit checks and serviceability assessments.

Additional Proposals for the Federal Election

The Property Council’s platform includes several other key proposals aimed at addressing the housing crisis ahead of the 2025 federal election:

• Establishing a Housing Sub-Committee: A new housing sub-committee of the federal cabinet, chaired by the Minister for Housing, to focus on national housing policy and delivery.

• Expanding Housing Incentives: Doubling the $3 billion performance-based New Home Bonus and $500 million Housing Support Program for states and territories that exceed targets under the National Housing Accord.

• Fast-Tracking Development Approvals: Introducing a fast-track pathway for Environmental Protection Biodiversity and Conservation (EPBC) assessments, with dedicated resources and decision-making timeframes for residential developments set to be completed by 30 June 2029.

• Age-Friendly Housing: Increasing the supply of age-friendly housing to better accommodate Australia’s growing older population.

• Purpose-Built Student Accommodation: Adjusting investment settings to support the development of purpose-built student accommodation.

Summary

The Property Council of Australia’s proposed First Home Buyer Accelerator Loan Scheme seeks to support first-home buyers and stimulate the construction industry through a government-backed interest rate cap and reduced deposit requirements. The initiative could save first-home buyers thousands of dollars annually, making it easier to enter the property market while addressing the ongoing housing supply shortage.

Alongside this proposal, the Property Council’s broader platform advocates for a range of policy changes aimed at fostering a more affordable and accessible housing market. With the federal election in sight, these proposals could play a key role in shaping Australia’s housing future.

Source: REA