HomeStart Finance

1394 The Hon. A. PICCOLO (Light) (24 September 2019). Can you advise what the difference in basis points tends to be between interest rates charged under HomeStart Finance's low deposit loan scheme and commercial interest rates?

The Hon. S.K. KNOLL (Schubert—Minister for Transport, Infrastructure and Local Government, Minister for Planning): I have been advised by HomeStart Finance:

HomeStart adopts a prudent approach to credit risk and market positioning which is reflected in its interest rates.

As advised under question 1391 the low deposit loan carries higher credit risk than the graduate loan due to the difference in eligibility criteria. The graduate loan enables customers who have achieved at least a certificate III qualification to purchase a home with a deposit from 3 per cent compared to the usual 5 per cent.

The low deposit loan enables customers who meet other criteria, but lack at least a certificate III qualification to also purchase a home with a 3 per cent deposit. Consequently, there is a distinctive difference in credit risk between the two products, and in recognition of the higher risk attached to customers without a minimum level of education the low deposit loan carries a 1 per cent interest premium for the first 12 months only. After this time, the low deposit loan interest rate reverts to HomeStart's standard variable interest rate which also applies to the graduate loan.

To HomeStart's knowledge, no other mainstream lenders are offering mortgages with a deposit of only 3 per cent. Consequently, comparisons between the interest rate on HomeStart's graduate loan or low deposit loan and 'commercial interest rates' cannot be made, as there are no comparable products.