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More single parents and first-home buyers will be able to buy a home with a very small mortgage deposit as the federal government expands the Home Guarantee Scheme in the Budget. 

Saving up for that coveted 20 per cent deposit takes a decade on average and it’s getting harder with house prices still surging by a third, over the year, in both capital cities and regional areas. 

Record-low 0.1 per cent interest rates have helped existing home owners buy another house but the strongest annual property price growth since 1989 has locked many low-income Australians out of real estate.

In Tuesday night’s Budget, Treasurer Josh Frydenberg will announce 50,000 new places a year under the Home Guarantee Scheme, expanding on the program introduced in last year’s Budget. 

More single parents and first-home buyers will be able to buy a home with a very small mortgage deposit as the federal government expands the Home Guarantee Scheme in the Budget (pictured is Prime Minister Scott Morrison with truck driver Julie Moore in western Sydney)

More single parents and first-home buyers will be able to buy a home with a very small mortgage deposit as the federal government expands the Home Guarantee Scheme in the Budget (pictured is Prime Minister Scott Morrison with truck driver Julie Moore in western Sydney)

More single parents and first-home buyers will be able to buy a home with a very small mortgage deposit as the federal government expands the Home Guarantee Scheme in the Budget (pictured is Prime Minister Scott Morrison with truck driver Julie Moore in western Sydney)

Saving up for that coveted 20 per cent deposit takes a decade on average and it's getting harder with house prices still surging by a third, over the year, in both capital cities and regional areas (pictured is a home buyer in 2020)

Saving up for that coveted 20 per cent deposit takes a decade on average and it's getting harder with house prices still surging by a third, over the year, in both capital cities and regional areas (pictured is a home buyer in 2020)

Saving up for that coveted 20 per cent deposit takes a decade on average and it’s getting harder with house prices still surging by a third, over the year, in both capital cities and regional areas (pictured is a home buyer in 2020)

In one part of the scheme, single parents with dependent children will be able to buy their first home or re-enter the property market with a two per cent deposit, without having to take out expensive lender’s mortgage insurance.

Taxpayers will underwrite the rest of the 20 per cent deposit. 

The Family Home Guarantee will set aside 5,000 places each year from July 2022 to June 30, 2025. 

Another 35,000 places each year will be reserved from July 2022, up from 10,000, under the First Home Guarantee enabling eligible first-home buyers to buy a new or existing home with a deposit of just five per cent.  

First-home buyers can already take advantage of state government stamp duty exemptions with $650,000 the threshold in New South Wales and $600,000 the cut-off in Victoria.  

The federal government is also establishing a new Regional Home Guarantee giving a subsidy each year to 10,000 borrowers, including first and non-first home buyers, to buy or build a new home between October 1, 2022 and June 30, 2025. 

Regional house prices surged by 25.9 per cent in the year to February to $585,709, CoreLogic data showed.

But areas on the NSW Mid-North Coast have had even more dramatic increases, with Coffs Harbour’s median house price during the past year soaring by 30.2 per cent to $833,697.

In Tuesday night's Budget, Treasurer Josh Frydenberg will announce 50,000 new places a year under the Home Guarantee Scheme, expanding on the program introduced in last year's Budget (pictured is a house up for auction at Strathfield in Sydney's inner west)

In Tuesday night's Budget, Treasurer Josh Frydenberg will announce 50,000 new places a year under the Home Guarantee Scheme, expanding on the program introduced in last year's Budget (pictured is a house up for auction at Strathfield in Sydney's inner west)

In Tuesday night’s Budget, Treasurer Josh Frydenberg will announce 50,000 new places a year under the Home Guarantee Scheme, expanding on the program introduced in last year’s Budget (pictured is a house up for auction at Strathfield in Sydney’s inner west)

The Port Macquarie suburb of Thrumster saw prices climb at an annual pace of 32.3 per cent to $908,813 while at beachside Lake Cathie, a short drive away, values rose by 36.5 per cent to $993,097.

This occurred as greater Sydney’s median house price soared by 26 per cent to $1,410,128. 

Brisbane’s mid-point house values surged by 32.8 per cent to $828,175.

Australia’s national property price rose by 20.6 per cent to $728,034 in the year to February – a slight moderation from the 22 per cent rise last year which was the fastest annual growth pace since 1989. 

In one part of the scheme, single parents with dependent children will be able to buy their first home or re-enter the property market with a two per cent deposit, without having to take out expensive lender's mortgage insurance. Taxpayers would underwrite the rest of the 20 per cent deposit (pictured are auctioneers at Strathfield in Sydney)

In one part of the scheme, single parents with dependent children will be able to buy their first home or re-enter the property market with a two per cent deposit, without having to take out expensive lender's mortgage insurance. Taxpayers would underwrite the rest of the 20 per cent deposit (pictured are auctioneers at Strathfield in Sydney)

In one part of the scheme, single parents with dependent children will be able to buy their first home or re-enter the property market with a two per cent deposit, without having to take out expensive lender’s mortgage insurance. Taxpayers would underwrite the rest of the 20 per cent deposit (pictured are auctioneers at Strathfield in Sydney)

Australia's national property price rose by 20.6 per cent to $728,034 in the year to February - a slight moderation from the 22 per cent rise last year which was the fastest annual growth pace since 1989 (pictured is a house at Turramurra on  Sydney's Upper North Shore where houses typically cost more than $2.5million)

Australia's national property price rose by 20.6 per cent to $728,034 in the year to February - a slight moderation from the 22 per cent rise last year which was the fastest annual growth pace since 1989 (pictured is a house at Turramurra on  Sydney's Upper North Shore where houses typically cost more than $2.5million)

Australia’s national property price rose by 20.6 per cent to $728,034 in the year to February – a slight moderation from the 22 per cent rise last year which was the fastest annual growth pace since 1989 (pictured is a house at Turramurra on  Sydney’s Upper North Shore where houses typically cost more than $2.5million)

An average, full-time worker on $90,917 with a 20 per cent deposit would owe the bank $582,427 and have a debt-to-income ratio of 6.4.

The Australian Prudential Regulation Authority considers a debt-to-income ratio of ‘six’ to be risky.

Even before that big price surge, ANZ and CoreLogic calculated it would take the typical Australian household a record 10.2 years to save for a 20 per cent deposit to buy a median-price property if they put aside 15 per cent of their pre-tax income.

This rose to 10.8 years for a house deposit and nine years for a unit.

While the federal government’s Home Guarantee Scheme does away with the need for a 20 per cent deposit, a lender would still be required to assess a borrower’s ability to cope with a three percentage point increase in mortgage rates.

Source: Daily Mail

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