The Insurance Council of Australia (ICA) has shown its support for the federal government's plans to expand the Home Guarantee Scheme.
The scheme's main objective is to facilitate earlier access to home ownership for first-home buyers (FHBs).
The ICA said insurers will continue to support the scheme, provided that the expansion will not further stimulate the property market or impact the viability of a well-functioning Lenders Mortgage Insurance (LMI) market.
Commenting on the government's announcement, ICA CEO Andrew Hall emphasised LMI's crucial role in supporting prudent high loan to value lending in Australia since the post-war period.
“Lenders mortgage insurance provides creditworthy borrowers without a substantial deposit with a timely and cost-effective way to access home loans,” Hall said. “In establishing the scheme, we were pleased the government acknowledged the value of the LMI sector and the important role it plays in the housing market.”
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In 2021, an independent statutory review of the operation of the National Housing Finance and Investment Corporation Act recommended careful consideration of the potential impacts on the viability of the LMI sector if changes to the number of guarantees offered or eligibility criteria were contemplated.
Meanwhile, the ICA explained that a weak and unstable LMI sector would most likely see small and medium lenders at a disadvantage compared to large lenders, impacting market competition and borrowers on lower-than-average incomes, including FHBs.
As a result, despite supporting the government's recent announcement, the ICA and its members will remain concerned about the continued expansion of the scheme.
“The insurance sector supports initiatives that improve access to home ownership,” Hall said. “However, it's important that unintended consequences are carefully considered and that policy settings support the ongoing health of the successful LMI sector.”
