Professional services firm Deloitte believes the 2008/09 budget is making some initial steps to close the gap between the supply of and demand for affordable homes.

“The $2.2bn housing affordability package to assist first home buyers and renters will be welcomed by consumers and still leaves the door open for the Government to consider more recent industry proposals to support liquidity and enhance competition in the housing mortgage sector generally,” said Graham Mott, Deloitte Financial Services Partner.

The mortgage industry has currently provided proposals such as the Canadian model whereby the Government provides a guarantee to investors investing in high quality mortgage backed securities.

“Whilst not a wholesale solution, such a proposal is designed to help restore some confidence in the mortgage sector,” Mott explained.

In this way consumers could once again benefit from the increased competition enjoyed over several years through lowering the cost of mortgages through the intelligent use of securitisation as a funding mechanism.

Through committing $1.2bn through Enhanced First Home Saver Accounts over four years, $623 million over four years to the national Rental Affordability Scheme, as well as $500 million over five years in the Housing Affordability Fund, housing supply will be boosted and costs to home buyers reduced.

“Interestingly, the Budget release rejects proposals from a number of superannuation funds and industry bodies to use a single trust structure for first home saver accounts for simplicity of administration, in favour of separate trusts in order to preserve the integrity of existing retirement savings,” Mott said.

“The further measures introduced in terms of doubling the funds available to enhance the support for borrowers in distress through financial counselling, is welcome. But it does raise the question of whether the Government believes the problem has doubled. Or does it reflect the need to right some of the inadequacies of the past and require further boosting?” Mott asked.

“Certainly recent interest rate rises are expected to increase difficulties in the sector,” he said.

“Recognising this, the Government has indicated it will be encouraging lending organisations to more actively engage with their customers who are exhibiting early signs of financial stress and require them to provide information on available counselling services.

“Responsible financial institutions are already proactively managing these challenges and will continue to use the links with the financial counselling networks,” Mott concluded.