Apr 23

Written by: Brad Smith
Thursday, April 23, 2009 2:51 PM

Prime Minister Kevin Rudd appeared today to settle the recent debate on whether or not his government would look to cash in on the popularity and success of the 1st Home Owners’ Boost payments by declaring that this would indeed come to an end as initially planned on June 30th 2009. The national scheme, introduced in October 2008 as an extension to the State Governments’ First Home Owners’ Grant payments, sees first home buyers building a new dwelling receiving a cash boost of $21,000 (in total) and those purchasing an existing dwelling receiving a total of $14,000.

While it was always clear that the bonus system was intended as a merely short term measure to kickstart the housing market and that schemes of this nature require an end date to have the desired effect, its proven success in incentivizing 1st home buyers over the past 6 months suggests that it may be best not to tamper with an obvious strength within an economy clearly in recession and struggling overall.

The news has been met with protest from mortgage brokers and real estate groups who are urging Rudd to delay the decision. The Sydney Morning Herald quotes Real Estate Institute of NSW president Steve Martin as saying “This is the wrong decision and is entirely premature. We have a further 2 months before the increased payments are due to end. We should be waiting until then to see the state of the national and global economy before and final decision is made.”

Conversely the same newspaper’s editorial (SMH) comments today that this boost to the first home buyer market is artificially inflating the economy and tempting people into owning or buying homes that may not be capable of making the necessary repayments, thanks also to numerous cuts to interest rates. It warns that the boost is “producing some perverse results and may well end in tears for many borrowers and lenders alike”.

Continue to visit this blog over the coming days for further developments on this story and go to www.HelpMeChoose.com.au to see if you are getting the best possible deal on your home loan.

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