Australians accessing government-backed mortgage schemes will be slapped with hundreds of thousands of dollars in additional interest fees, rating agencies warn.
The cornerstone cost of living measure to increase the number of places on New Home Guarantee scheme outlined in the federal budget, will mean buyers looking to access the scheme to enter the property market sooner will need to pay more interest compared to someone who saved for a regular deposit.
According to calculations from RateCity, a person buying at the Canberra cap of $500,000 would incur $70,412 of additional interest over a 30-year loan, while a Sydneysider would face $112,659 in extra payments.
This is because a greater proportion of the mortgage size accrues interest compared to someone who entered the market with a loan-to-value ratio of 80 per cent, which is the traditional hurdle to forego the need of lenders mortgage insurance.
First-time buyers are also facing property prices rises in both metro and regional areas, with supply constraints a major proponent in fueling 40 per cent growth in dwelling values in areas such as Newcastle and Launceston.
During Question Time, Prime Minister Scott Morrison was probed by Labor over comments he made on Wednesday about the best solution for renters is to help them buy a house.
Labor Leader Anthony Albanese dubbed the comment as the Prime Minister's "let them eat cake" moment.
Mr Morrison when he took to the dispatch wound back the comments, saying he was referring to the specific housing scheme outlined in the budget on Tuesday.
"300,000 Australians have been able to get into their home as a result of the home guarantee," he said.
"The only housing policy [Labor had] was to put up the housing tax."
March figures from Domain's rent price report shows rental prices nationally rose 11.8 per cent year on year.
In Canberra alone, annual rental yields 12.5 per cent year on year.
On a quarterly basis, ACT rentals experienced the biggest growth by 4.7 per cent.
RateCity research director Sally Tindall said people looking at taking on these schemes need to factor in that they are taking on more debt compared to a normal loan.
"The larger your loan, the more interest you'll pay the bank each month, which can potentially run into the tens, if not hundreds, of thousands of dollars, particularly if you keep the loan for the full 30 years. And when the rate hikes hit, the impact of rising repayments will be amplified on a larger loan," she said.
Ms Tindall noted the drawcard is earlier access to the market and the ability to begin building a wealth asset, but warned rate hikes and a price downturn could impact the ability to service a high debt mortgage.
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