A failed attempt by the federal government to encourage first home buyers to save their pennies in a unique banking product, designed specifically to help them scrape up a deposit, has fallen short of its promise to the banking industry.
One of the Labor government’s pre-election sweeteners was their vow to swoop in and save the Great Australian Dream of home ownership from the perils of rising house prices.
Their super charged weapon? A tailored First Home Saver Account that Treasurer Wayne Swan expected to generate $4 billion worth of savings for the banks.
However a recent report published on news.com.au, revealed that the Commonwealth Bank has stopped offering the FHSA due to a lack of interest from the first home buyers it was intended for. Five years after the product went on the market, less than 5 per cent of the target savings of $4 billion has been realised, with only $173 million currently stashed in the accounts across Australia.
As with most objectives politicians have, the government’s target of 400,000 FHS accounts being opened by 2010 fell significantly short, with only 27,400 taking them up on the offer.
In my opinion the system was too complex and not well publicized.
According to a spokesman for the CBA, most first home buyers choose to save their money in a term deposit account or alternative savings account or even get their parents to go guarantor for them, “as opposed to using this particular product.”
Customers complained to the bank that the FHSA was too complex and the requirement to have their cash locked away, out of reach for four years, was not all that appealing.
Perhaps the biggest turn off though, was the fact that the very thing the account was meant to help first home buyers accomplish – accumulating enough money for a deposit on the average home – turned out to be nigh on impossible.
In fact the CBA only have six FHSAs containing the maximum $85,000, which is actually $35,000 shy of the amount required to avoid paying mortgage insurance on a median priced property.
And it’s this lack of incentive, as well as very little marketing to make people aware of the product’s existence, that has led to the average FHS account only having a measly $6328.47 in it (according to the Australian Prudential Regulation Authority); hardly enough to put a deposit on a garden shed, let alone a piece of real estate!
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