First-home buyers to turn to smaller lenders, as available scheme places with major banks run out

First-home buyers will need to turn to smaller lenders quickly to use a new government loan scheme to get onto the property ladder in the coming months, with all the places available from the big banks already taken up.

More than 5700 Australians have signed up for the First Home Loan Deposit Scheme, which enables first-home buyers to get into the market with as little as a 5 per cent deposit – without having to pay lenders mortgage insurance (LMI).

All 5000 scheme positions available with the National Australia Bank and Commonwealth Bank have already been reserved, 2000 of which were only released last Saturday.

The remainder of the 10,000 scheme positions available this financial year are with 25 smaller lenders including Bendigo Bank, Bank Australia and CUA. While the two big banks released 3000 spots at the start of the year, smaller lenders were only able to join in February – with hundreds of applications made in the week since. Another 10,000 scheme guarantees will be released from July for the next financial year.

“We’ve had a lot of interest in the scheme already with a steady stream of applications, and we think we’ll fill our allocation pretty quickly,” said a Bank Australia spokesperson.

A NAB spokesperson said the bank has seen “incredibly strong demand” for the program, and encouraged customers to get in touch in case more places became available if some applicants decided not to purchase.

Chris Foster-Ramsay, principal finance broker at Foster Ramsay Finance, said demand for the scheme was outweighing available spaces, with about 100,000 first-home buyers every year. He expected positions with smaller lenders to be snapped up swiftly.

“The major banks are preferred [by most first-home buyers] … but ultimately they want a spot,” he said. “They just want to avoid paying LMI if they can.

“From my understanding NAB sold out on their spots on Saturday, those spots went within two hours.”

One third of applicants so far are aged between 25 and 29, with another third between 30 and 39, according to figures from the National Housing Finance Investment Corporation (NHFIC).

The average income for singles, who claimed about two thirds of allocated places, is $67,698, while couples earn an average of $110,998. Both averages sit well below the respective thresholds of $125,000 and $200,000.

The biggest uptake has been in Sydney where initial NHFIC figures show the average purchase price so far came in at at 82 per cent of the city’s eligible price cap of $700,000, or $574,000. Melbourne and Brisbane were next, with first-home buyers there spending an average of $474,000 and $389,500.

There were 5146 applications lodged to the two major lenders, with first-home buyers able to apply with both banks to ensure they got the best deal.

A Commonwealth Bank spokesperson said all available places had been reserved due to “overwhelming interest in the scheme”, but that customers interested in applying should speak with their lender or broker as places may become available over the coming months if applicants do not purchase a property.

A Bendigo Bank spokesperson said the lender had already accepted hundreds of expressions of interest.