Overview of the 2022-2023 budget: measures impacting mortgages

Treasurer Josh Frydenberg presented the 2022-23 federal budget on Tuesday, March 29, revealing a deficit of $78 billion (3.4% of GDP). This compares to a deficit of $79.8 billion the previous year.

The cost of living as fuel prices rise, omicron and the effects of recent flooding in New South Wales and Queensland have been priorities for the government, among other factors.

“The global pandemic is not over. Devastating floods have hit our communities,” Mr. Frydenberg said.

“We live in uncertain times. The last two years have been difficult for our country, there have been setbacks along the way.”

The government has said it plans to spend $6 billion on flood relief and recovery, as part of support for residents, farmers, small businesses and local councils.

Among other measures to combat the rising cost of living, the government has also introduced a one-time cash payment of $250 for retirees, veterans, job seekers, caregivers, eligible self-funded retirees and concession card holders.

There is also a temporary fuel tax reduction – the government will reduce fuel tax by 50% for six months, from the current 44.2 cents per liter to 22.1 cents.

But home ownership was also at the center of this year’s budget.

The expanded home warranty system

As reported on Monday 28 March, the government has expanded its Guaranteed Housing Scheme, increasing the number of places under its Guaranteed First Home and Guaranteed Family Housing schemes, and launching a new scheme just for regional Australia.

The government has committed $8.6 million over the four years from 2022 to 2023 to more than double the total number of places under the Housing Guarantee Scheme to 50,000 places per year.

The program is expected to cost $1.3 million in 2022-23, $1.4 million the following year, and $1.7 million in 2024-25, before climbing to $4.2 million in 2025- 2026 – when there are more people who have obtained collateral and there is more risk of default.

There will be 35,000 guarantees available per year for the First Home Guarantee (formerly First Home Loan Deposit Scheme), up from 10,000 currently from July 1.

The scheme, launched in 2020, allows first-time home buyers to buy a home with as little as 5% down payment, while the government guarantees up to 15% of the purchase price of the property – helping the borrower to avoid lenders’ mortgage insurance (IMT).

The family home guarantee, which also allows single parents with dependent children to buy a home with a minimum down payment of 5%, will be extended from July 1 to June 30, 2025.

There will be 5,000 places per year for families.

The government has also launched a new guarantee scheme as part of the budget, specifically aimed at regional buyers.

Under the Regional Home Guarantee, borrowers in the regions (including those who are not first-time homebuyers) will be able to buy or build a new home with as little as 5% down payment, while the government guarantees 15% of the purchase price of the property.

The scheme will be restricted to residents who have not owned a home for five years.

Subject to the adoption of legislation, the regional program should start during the year 2022-23.

There are other funding initiatives in the budget targeting regional communities, including a new $2 billion regional accelerator program, with investments in infrastructure, advanced manufacturing, learning and higher education. .

As Mr. Frydenberg explained, “there is a lot in this budget for the regions”, because the government sees it as a key axis of growth.

“One of the permanent structural changes to our economy post-COVID has been more people moving to the regions,” he told reporters.

“You see this in real estate prices for example in the regions. People want land and a house, they want that peace of mind and they don’t want to be locked into cities.

Meanwhile, the National Housing Finance and Investment Corporation (NHFIC), which administers the Housing Guarantee Scheme, has seen its liability cap for low-cost loans to community housing providers increased by $2.2 billion. additional dollars, to reach a total of 5 billion dollars.

The increased lending capacity should support around 10,000 additional homes.

The government said the NHFIC has supported around 15,000 new and existing affordable homes since its inception in 2018.

Watch for rising rates

For 2022-23 and 2023-24, the strength of the labor market and wage growth are expected to lift consumer spending from 3.5% in 2021-22 to 5.75% and 3.75% over the years. following.

But higher interest rates and weaker house price growth could temper consumption growth, the budget documents said.

The outlook also warned of an impact from a rise in the cash rate, noting a “risk that the normalization of monetary policy will have a more negative impact on consumption.”

Housing investment is expected to increase by 5% in 2021-22 and 3.5% in 2022-23, fueled by low interest rates, rising house prices and government programs such as HomeBuilder , which contributed to a major pipeline of construction work.

However, this growth should be reversed the following year. Rising interest rates are expected to lower housing investment by 1.5% in 2023-24.

Recent shortages of building materials and labor, as well as COVID-19 outbreaks, have increased construction costs and completion times for new housing.

Budget documents warned that flooding and the invasion of Ukraine, which rocked supply chains, could pose additional risks, but the stresses are expected to “slowly ease”.

However, the resumption of net outward migration after the reopening of borders is expected to boost housing investment.

Social housing

About $1.64 billion. was dedicated to the National Housing and Homelessness Agreement (NHHA) in 2022-23, which provides affordable housing and aims to prevent homelessness.

The government’s commitment is roughly comparable to the previous year, when it gave the NHHA about $1.61 billion.

The NHHA contribution is part of $2 billion in funding for state affordable housing services, which also includes $313.7 million in national partnership payments.

An additional $223.8 million was allocated for Indigenous housing in remote communities in 2022-23, up from $185 million the previous year.

Additionally, $3.8 million in 2022-23 has been allocated to the Northern Territory Remote Aboriginal Investment, designed to invest in improving social housing and removing asbestos from community buildings in remote communities.

For the government’s housing and community amenities function, which includes spending for NHHA, other housing programs and Defense Housing Australia, spending is expected to decline in future years.

The drop reflects the end of the HomeBuilder program, the conclusion of the NHHA in June 2023, and lower payments under the National Rental Affordability Scheme, which is now closed to new applicants.

About 5.7% less will be spent in 2022-23 than the previous year, at $8.2 billion, before a 29.8% decline over the following three years.

However, the guarantee, grant and loan schemes administered through the NHFIC are not included in the housing and community amenities function.

Overview of the 2022-2023 budget: measures impacting mortgage loans


Last update: March 29, 2022

Posted: March 29, 2022

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Sarah Simkins

Sarah Simkins

Sarah Simpkins is the managing editor of Mortgage Business and The Adviser.

Previously, she reported on banking, financial services and wealth management for InvestorDaily and ifa.

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