Labor claims its changes to the first home buyers scheme will help more people “realise their dream of home ownership sooner”. However, it is not only no solution to the housing affordability crisis, it will likely make it worse.

The changes, which came into effect on October 1, allow first home buyers to take out a mortgage with a 5% deposit, down from 20%. The plan has no income cap, meaning first home buyers with higher incomes are eligible, raises the maximum price for eligible properties and covers the lender’s mortgage insurance, which ranges from 1%–5% of the borrowed amount.

The logic is that lowering the deposit for first home buyers will make it easier for them to enter the “property market”.

But, as even mainstream economists have pointed out, it will do little to boost home ownership rates while house prices skyrocket ever higher. The Australian Financial Review described the scheme as a “cruel illusion” that will lead to property prices rising by 7% this year alone.

The plan will bring more first home buyers into the market without adding housing supply and therefore will push up housing prices.

Labor’s plan does nothing to help renters, or new and existing homeowners with high mortgage repayments. But it does help investors and speculators by pushing up housing prices.

Almost 30% of mortgage holders, about 1.5 million people, are at risk of mortgage stress and this figure is rising rapidly. Those considered “extremely at risk” make up 19.7%.

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