Friday, March 4, 2011

What Would Make First Home Saver Accounts Work?

The Federal Government has recently made public the submissions that they received in response to the First Home Saver Accounts. AS mentioned earlier on this blog, the First Home Saver Account is a good vehicle for first home buyers in Australia to save up money for a deposit. However, currently, you need to be someone who:
  1. Will not be buying a house for the next four years 
  2. Definitely will be buying after four years 
If you do not meet both requirements, your money will go into your superannuation account, never to be seen for the next 50 years or whenever it is until you retire. So the risks are high. What if in two years time, the housing market collapses and you really, really want to buy a house? Amendments to the FSHA have been suggested but it is interesting to read some of the feedback from various institutions in response to the amendments.

In their submission, the Australian Bankers Association hoped to work with the Federal Government on implementing changes to FHSAs that: 
• improve consumer awareness, customer understanding, and up take of FHSAs; 
• provide flexibility for first home buyers; 
• lift savings for first home buyers; and 
• enhance the customer experience with FHSAs.

The Real Estate Institute of Australia was supportive of the proposed changes to the First Home Saver Account but suggested the following changes to the FSHA. 
• A cap on these accounts to be linked to movements in house prices rather than the CPI.
• That first home buyers have access to their voluntary superannuation contributions for the purchase of a home.

An interesting submission by Abacus representing credit unions showed why so few FHSA are available in the market because from the provider's perspective, the FHSAs are unappealing and uneconomical due to high complexity, substantial IT development and back office support for the product, and onerous ongoing reporting requirements. 

It will be interesting to watch this space and see how the FHSA will be modified and meanwhile, a smart first home owner who wants to play it safe should only park money that they don't need into a FHSA near them.

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