First home buyers in Newcastle with a low deposit are set to have more choice come July 1, following the federal government's announcement it would increase the price caps under its First Home Guarantee scheme.
The new caps mean that 26 more suburbs in the region will be in reach of those seeking to buy a house, according to analysis from CoreLogic, with more than half of suburbs in the region set to fall under the new $900,000 price cap.
The cap for properties covered by the scheme, which allows buyers to purchase with a deposit as low as 5 per cent without paying for lenders mortgage insurance, will increase from its current rate of $800,000 from July 1.
That means that houses in suburbs like Belmont, median value $885,000; Mayfield, median value $871,000; and Wangi Wangi, median value $805,000 will be within reach of buyers from that date, pending no major price growth.
The increased cap is a reflection of the pace of property price growth in the region, with house values up 27.4 per cent, or $195,526, in the 12 months to March 2022 according to CoreLogic.
A total of 56 suburbs in Newcastle and Lake Macquarie will now be covered by the scheme, based on median house values, while 47 remain over the cap.
Just 30 suburbs fall under the current cap.
Using median unit values, 23 suburbs will be covered come July 1, with only one unit market too expensive to be included.
55 per cent of housing stock across Newcastle, Lake Macquarie and the Illawarra (the three areas outside of Sydney that will be subject to a $900,000 cap) will be covered by the scheme when the limits come into place, CoreLogic estimated.
The changes may mean more choice, but strict lending standards mean there's unlikely to be an influx of first home buyers into Newcastle's pricier suburbs.
New Canstar research shows that a dual-income couple with a car loan and two children looking to buy a $900,000 house with a 5 per cent deposit would need to earn a combined $155,934 to qualify for a loan, based on a 2.99 per cent interest rate.
CoreLogic research director Tim Lawless said that rate rises and lending criteria may temper the amount of first home buyer demand in these pricier suburbs.
"Now that we're starting to see more of a leg up for first home buyers in the form of overcoming one of the largest hurdles to homeownership, the deposit, it stands to reason that we'll see those suburbs that fit the criteria will become more popular," he said.
"[But] I think any lender, even though the deposit has largely been taken care of, is still going to be looking at the borrower's capacity to service the loan. That's another factor that will temper the level of interest in these new rounds of incentives," he added.
