Kevin Rudd’s first-home saver account initiative gaining traction, despite banks’ exit
Kevin Rudd’s housing initiative – the first-home saver account (FHSA) incentive – is gaining traction among first-home buyers, despite the abandonment of the scheme by the Commonwealth and ANZ banks.
The scheme, which was a major election initiative of the incoming Rudd government in 2007, now has 33,000 account holders, according to the latest figures from the Australian Prudential Regulation Authority.
During the first nine months of 2011, the scheme attracted more than 7,400 new account holders.
As of September 2011, there were 33,000 FHSA accounts, up 87% since March 2010. There’s an average $7600 in each account, for a combined total of $251 million.
But the tally is unlikely to ever reach the scheme’s target of 700,000 first-home savers. It was envisaged for 2012.
The take-up of the savings scheme was clouded by the first-home owner boost scheme, which ran from October 2008 to the end of 2009 and encouraged first-home buyers to purchase a home sooner rather than save.
The increase has come despite the Commonwealth Bank, the nation's largest home lender, dumping the scheme in August, and the ANZ ceasing to take any new savings accounts in October last year.
There are 16 financial institutions offering the accounts, mostly credit unions. The CBA and ANZ were the only two of the big four to take up the initiative, leaving first-home buyers to go to only the ME Bank and AMP Bank.
The credit unions offering the accounts include Teachers Credit, Hume Building Society, Credit Union SA and the Big Sky Credit Union.
The scheme aims to help first-time buyers save for a deposit for their first homes. Under the FHSA, the government contributes 17% on the first $5,500 of individual contributions made each year. Account holders are required to keep savings in the FHSA for four financial years before they can use the funds to buy a home.
The government amended the scheme last May to allow savings in an account to be paid into an approved mortgage after the end of a minimum four-year qualifying period, rather than requiring the money to be paid into a superannuation account.
Under the original policy, if the account holder bought a home before the end of that four-year period, the balance of their account was required to be transferred into the borrower’s superannuation fund so that it remained in a concessionally taxed environment.
In April 2008 the then prime minister conceded the scheme’s design was "complex".
Responding to submissions to a Treasury inquiry that argued the accounts were complex, Rudd said: "We don't pretend to get everything right on the first chop.”
"We're going to see what the public's got to say through these submissions and we'll finalise the design."
When the much-vaunted first home saver account schemes open in October 2008, the consumer group Choice noted the CBA was offering a return below the cash rate.
