Defence home loan subsidy to change after veterans left worse off

The government plans to change its home loan subsidy for Defence personnel after criticism that it is uncompetitive. (ABC News: Keana Naughton) A Defence home loan scheme appears set to change after claims it is leaving some members and veterans paying more than they should. The Defence Home Ownership Assistance Scheme offers subsidised loans to eligible personnel and veterans, but only provides three banks to choose from. Government contracts with the three banks will soon expire and Defence Personnel Minister Matt Keogh has flagged that the government wants to see a much more competitive scheme going forward. Link copiedShareShare articleThe federal government has acknowledged change is needed to a home loan subsidy scheme offered to Australian Defence Force members and veterans, which some argue is seeing uncompetitive home loans subsidised with taxpayer funds. The Defence Home Ownership Assistance Scheme offers (DHOAS) eligible members and veterans direct subsidies on the interest charged on their home loan. But mortgage brokers have raised concerns that the scheme's uncompetitive structure, with members offered mortgages from just three banks, winds up pushing members into home loans charging interest rates well above the most competitive on the open market. They argue while members are usually better off overall once the subsidy is included, the scheme should not rely on taxpayer money to effectively cover elevated interest rates. The scheme was established to help ADF members and veterans achieve home ownesrship. (ABC News: Mitch Edgar) The scheme offers members and veterans mortgages with three lenders — NAB, Defence Bank and the Australian Military Bank. Logan Stanford, the managing director of mortgage broker Stanford Financial, argues that limiting the scheme to three lenders means those eligible cannot access the most competitive loans available. He said it meant taxpayer subsidies paid through the scheme wound up compensating members paying higher interest rates than they might be otherwise. Mr Stanford says that as a result they miss out on tens of thousands of dollars in savings they could be making if more competitive interest rates were offered. "The point of it is not to cover a higher interest rate, it is a subsidy that they have earned through service," he said. A 10-year agreement between Defence and the three banks on the scheme's lending panel is due to expire shortly, and Defence is open to tender to appoint new lenders. Minister for Defence Personnel Matt Keogh has acknowledged that the scheme needs to work better for ADF members. (ABC News: Ian Cutmore) Minister for Defence Personnel Matt Keogh said it was an opportunity to make the scheme more competitive. "Any increase from the three [lenders], I think certainly would be an improvement for people and what they have available to them in terms of the product mix and everything else," he said. The home ownership scheme was launched almost 20 years ago in an effort to help ADF members get into the housing market, acknowledging many are required to frequently move when redeployed. The scheme pays a monthly cash subsidy directly to a home owner aiming to offset some of the interest on their mortgage. The size of the subsidy depends on how many years they have served and the size of the mortgage, up to a maximum of nearly $1200 a month. There are about 30,000 members involved with the scheme. During its life, only the same three lenders have been on the panel available to those seeking loans. They pay commissions to the federal government for each loan signed. Mortgage broker Logan Stanford has been lobbying for more lenders to be part of the scheme. (ABC News: Supplied: Logan Stanford) Mr Stanford, who has been lobbying for change to the scheme, says that stands in remarkable contrast to the government's five per cent home loan deposit scheme, which has more than 30 lenders available. He argues the three DHOAS lenders rarely offer the most competitive rates on the market — and most of the Defence members and veterans who contact his firm wind up turning down the subsidy and taking a loan on the open market. "I would confidently say it is in the 70 percentile mark of people that do not go ahead with a DHOAS loan," Mr Stanford said. He said the three lenders were also unable to take on many higher-risk clients, meaning many members and veterans were unable to access the scheme, but could take out loans with other banks. The government argues the scheme has been broadly successful in helping thousands of defence personnel buy a home through DHOAS subsidies. But it has come under increasing scrutiny inside and outside parliament. Liberal MP Phil Thompson, a veteran and now Shadow Assistant Minister for Defence, first raised the issue in a speech to parliament in 2022, arguing the scheme needed to be broadened. David Pocock has questioned whether a review of the lenders in the scheme should be brought forward.

Defence home loan subsidy to change after veterans left worse off

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