Budget Warning

Hi Scott,

I’ve just watched the Budget, and I reckon people need to be warned about these 5% deposit government schemes. I am old enough to remember the 1960s and early 70s when I was working in conveyancing. The state government had ‘vendor’s contract’ setps where people purchased homes under a contract of sale, with the title not transferred into their names until it was paid off. These were an absolute disaster as most people could never have paid off the contract, with interest rates too high and repayments too low. Many of them had to walk away as they owed more than the original purchase price of the property. Beware of governments bearing gifts!

Nancy

Hi Nancy,

You’re right, it’s potentially a taxpayer-funded trap for 50,000 families.

Let me explain:

In the Budget, the Government increased the Home Guarantee Scheme to 50,000 places.

The scheme allows first home buyers on low incomes to buy a home with just a 5% deposit. And for single parents it’s even less … all they need to scrounge up is a piddly 2% deposit.

Yet hang on a minute … isn’t this entire Budget about the rising cost of living?

So why is the Government encouraging low-income earners to load up on debt at a time when interest rates are rising?

Answer: for the very same reason that Labor has made this dud policy part of its election pitch:

They want your vote.

Strike me handsome! Giving people extra money to buy a home just filters through the market and makes all houses more expensive. When interest rates rise and house prices fall, many of these people will be underwater. And it’s you and me – taxpayers – who’ll be on the hook for the losses.

Luckily, I don’t need your vote, so I’ll tell it to you straight: avoid this scheme.

Scott.