- Bank withdraws FHSA due to lack of interest
- Customers find FHSA too complex, bank says
- Customers opting for other saving methods
THE nation’s largest home lender has stopped offering the federal government’s vaunted First Home Saver Account – because no one wants it.
Before coming to power, Labor held FHSAs out as having the potential to revive the Great Australian Dream for young home-hunters. Treasurer Wayne Swan anticipated $4 billion would flow into the accounts. But, five years on, the latest figures show less than 5 per cent of this amount – $173 million – is being saved in FHSAs.
The Daily Telegraph can reveal the Commonwealth Bank withdrew the product earlier this month.
A CBA spokesman yesterday said 95 per cent of home-hunters preferred to save through term deposits and savings accounts “as opposed to using this particular product”.
Even getting parents to go guarantor was more appealing.
The spokesman said customer feedback was that the FHSA was too complex and they didn’t want their cash locked away for four years.
Another likely turn-off – it’s impossible to accumulate enough for a deposit on the average Sydney home.
Everything you need to know about the First Home Saver Account
CBA has only six FHSAs containing the maximum $85,000. That’s $35,000 shy of the amount needed to avoid mortgage insurance on the median home.
“For Sydney, that cap is low. That would be an appropriate deposit for a small town,” Paul Smith of home finance brokers Loan Market said.
FHSAs attract a 17 per cent government contribution on the first $5500 deposited in any year. Individuals have to save the money for four years and must use the amount saved for a home loan.
Although the government aimed to have 400,000 accounts by 2010, it has only attracted a total of 27,400.
Mr Smith said: “People are largely unaware that the FHSAs exist. It has not been marketed to the public. While they have made changes to the scheme to make it easier, it has not been publicised to the same extent as the First Homeowner’s Grant.”
The government has decided advertising other measures – such as the carbon tax – are a higher priority.
It is currently spending $25 million on promoting the price on pollution.
Meanwhile, the average FHSA account has only a paltry $6328.47 in it, according to the Australian Prudential Regulation Authority.
That’s about enough to renovate a kitchen.