ANZ the only bank to offer government-backed first home saver accounts as CBA exits
The Commonwealth Bank, the nation's largest home lender, has dumped the federal government's much-vaunted but little-used First Home Saver Account scheme.
The bank withdrew the product earlier this month with a CBA spokesman suggesting that young home hunters preferred to save through term deposits and savings accounts.
Only 18 financial institutions offer the accounts, and most of them are credit unions. Just one of the four big banks, ANZ, now offers the accounts. Westpac and NAB were never participants in the scheme.
Before coming to power, the then-aspiring prime minister Kevin Rudd suggested the FHSA scheme had the potential to revive the Great Australian Dream for young home hunters.
Treasurer Wayne Swan anticipated $4 billion would flow into the accounts.
But, five years on, the recent March quarter figures show less than 5% of this amount – $173 million – has been deposited into FHSAs. Although the government aimed to have 400,000 accounts by 2010, it has only attracted a total of 27,400.
The first home saver account scheme had appeared to be finally gaining some traction, as the 27,400 accounts represented a 21% jump in accounts over the past year to form the basis of their future home deposits.
The purpose of the scheme was to encourage first-home buyers to save in a disciplined environment, which then helped with applications to banks.
The Daily Telegraph was told by a CBA spokesman that customer feedback was that the FHSA was too complex and they didn't want their cash locked away for four years.
But this well-intentioned scheme hasn’t matched the federal government’s initial high hopes of $4 billion under deposit by 2012. The typical account currently has $6,300, the Australian Prudential Regulation Authority says.
The initial projections were of 220,000 accounts opened in 2009, and 730,000 by 2012. The scheme had a very slow start, with just $41 million deposited after its first nine months. As at June 2009 there were just 13,946 First Home Saver accounts. This jumped to 22,600 as at June 2010, and to currently about 27,400.
It dates back to an election commitment by then aspiring prime minister Kevin Rudd, with the government offering to contribute up to $850 for every $5,000 deposited each financial year. This amount has now been adjusted to $935 for every $5,500 or more.
Anyone over 18 and under 65 who has not previously purchased a home in which to live can have an account with an indexed $80,000 balance limit.
One of the main reasons why the scheme's uptake was woefully slow was its introduction coincided with the frenzy accompanying the first home owner grant boost, one of the overdone stimulatory measures during the global financial crisis.
The first-home saver scheme became swamped by the first home owner grant bonus.
There are tight rules regarding withdrawals, which are tax-free but can only be used to go to the purchase of a first home.
Account holders who change their minds about buying a house can transfer the balance of the account into superannuation.
The account holder must live in the home for at least six months as his or her main residence following the purchase of the property after the withdrawal of the funds.
First home saver accounts are an individual account, not a joint account.
Account holders don't have to be Australian residents or living in Australia to open or contribute to a first-home saver account, but do have to be Australian residents for income tax purposes for at least part of the financial year to receive the government contribution.
