The peak body representing Australia’s finance brokers says the Government’s proposed loan guarantee for home buyers, which will allow them to enter the market with only a five per cent deposit, is a very good initiative.

However managing director of the Finance Brokers Association of Australia Peter White said the scheme’s success will be dependant on the banks which have over tightened credit policies following the royal commission.

“This will be great for first home buyers, although it’s worth noting that only about one tenth of the market will gain access to it,” he said.

While saving borrowers thousands of dollars in lenders mortgage insurance is a good outcome, Mr White cautioned that greater detail is needed to truly assess the benefits.

“There is a very good fundamental reason to have a deposit. If you can save for a deposit you can meet your monthly repayments, and this is what the banks look at.”

He also pointed out that with a falling property market, negative equity is a risk.

“We need to know the lenders’ credit policies around this, and they will have to step up to the mark and support it.”

However he said overall, “if it can help stimulate people into buying their own home then that’s great.”