Media Release: Serious Concerns Raised Over MyHome Program

Serious Concerns Raised Over MyHome Program

17 July 2024

Independent Member for Nelson Meg Webb has called for a review of the MyHome shared equity housing loan program in light of serious concerns raised over whether it may be disadvantaging the struggling Tasmanians it was supposed to be helping into affordable home ownership.

“Reports from Tasmanians who have considered the MyHomes program raises serious questions which need to be addressed as a matter of urgency,” Ms Webb said.

“I am particularly concerned about the high interest rates charged for the MyHome loan product, and the apparent lack of repayment flexibility provided for scheme participants, in contrast to other local home loan products on offer.

“When comparing the MyHome program with other state’s shared equity housing loan schemes, it looks like low-income Tasmanians are not necessarily getting as good a deal.”

Ms Webb said key areas requiring review include:

• The higher than market rate MyHome interest rate;
• Inflexible loan repayment options;
• Government equity component repayment or purchase queries; and
• Implications of a sole financial lender, Bank of Us, particularly given the limited MyHome loan product options and also insurance considerations.

MyHome Interest Rate

“When I did a quick initial online assessment of interstate shared equity housing schemes’ interest rates, it didn’t take long to see that at 6.86 per cent the Tasmanian MyHome program was nowhere near as competitive to other states such as NSW and Victoria, where some lenders were offering 5.99%,” Ms Webb said.

“In fact, the MyHome interest rate is not as competitive as other home loan products offered by the same finance provider, Bank of Us, many of which have considerably lower interest rates, such as the FlexiDiscount Home Loan Rate Special of 5.99%.

“We have to wonder why the program intended to assist low-income earners secure a home, would be charging higher interest rates than its other non-shared equity loans?”

Inflexible Loan Repayment Options

“Tasmanian participants in the MyHome scheme appear to be locked into a monthly payment regime, unlike every other interstate shared equity scheme where clients can choose weekly, fortnightly or monthly options.

“Interstate schemes also encourage participants to make additional payments in advance should they wish to, unlike Tasmanian MyHome clients who are instead directed to having an offset account.

“This is despite all research, and common sense, saying there is demonstrable benefit and advantage for borrowers to be able to pay more frequently, and in those times where they may have the funds available to do so.

“It is incomprehensible that this program intended to assist low-income Tasmanians, is explicitly discouraging those borrowers from investing additional savings or funds into the long-term security of their home.”

Government equity component repayment or purchase queries

“Other states encourage their participants with flexible options to repay, or purchase, the government’s equity share where they can.  MyHome participants are required to pay out the government’s share before 30 years, but it is unclear whether that can be done progressively or only by a one-off payment.”

Implications of a sole financial lender, Bank of Us,

“Serious concerns have been raised with me over the implications of the MyHome program consisting of only one accredited financial provider.

“In contrast, NSW’s shared equity programs provide participants two financial lenders, and Victoria has four participating financial institutions.

“This begs the questions whether Tasmanian MyHome participants could secure lower interest rates and more flexible repayment options should they have a choice of finance provider?”

Finance lender & Insurance Provider Relationship

Ms Webb also raised concerns over the difficulties experienced by some MyHome clients when they sought to obtain the necessary home insurance.

“It has been raised with me that the requirement to declare Homes Tasmania as a property equity holder on the Certificate of Currency proves to be a disincentive to insurance companies when MyHome clients try to obtain a policy.

“When this obstacle has been raised with the financial provider, Bank of Us, some people have felt they were then directed toward CGU Insurance, through which they have subsequently secured insurance cover.

“Interestingly, when searching Bank Of Us’ Financial Services Guide, I discovered a disclaimer that the bank operates as an intermediary for CGU Insurance and receives commissions for any insurance contracts arranged on behalf of clients.

“It has been raised with me that this commercial relationship was not made clear to some MyHome clients at the time they were struggling to secure insurance coverage.

“It appears we have the situation where Tasmanians wishing to utilise the MyHomes program, have no choice in the financial provider they can go to, and therefore have little ability to negotiate lower interest rates or flexible repayment arrangements comparable with their interstate counterparts.

“On top of which, potentially Bank of Us further benefits financially from any MyHomes clients who require home insurance through CGU due to other insurers reportedly baulking at the shared equity arrangement with Homes Tasmania.

At a Parliamentary hearing last week, on questioning by Meg Webb MLC, the CEO of Homes Tasmania confirmed the prohibitive insurance issue had been recognised and that MyHomes participants would no longer be required to declare Homes Tasmania as an equity holder for the purposes of securing insurance.

“While it is good the barrier to securing insurance for MyHomes participants has been recognised, questions remain over whether existing participants will have the opportunity to change their Certificate of Currency in order to seek more competitive insurance coverage for their property.

“Has this significant change in policy by Homes Tasmania been communicated to existing MyHomes participants?

“There are clearly serious ramifications of the government signing up with a sole financial provider for this important program intended to support those Tasmanians struggling to afford their own home, which warrant a thorough review.”

More Information: See Background Briefing Document Below or download as a pdf here