The Morrison government will raise the cap for the First Home Loan Deposit Scheme from $700,000 to $800,000 in Newcastle from July 1 as property prices spiral.
The city's median house price has surged 21 per cent in a year to $722,000, but the higher cap will give some first home buyers in Newcastle and Lake Macquarie more options when it comes to buying existing properties.
The price cap in the rest of the Hunter region, including in the booming suburbs around Maitland, will grow from $450,000 to $600,000 after July 1.
The scheme guarantees up to 15 per cent of the purchase price with eligible lenders, allowing first home buyers into the market with a deposit of 5 per cent without paying mortgage insurance.
Westpac bank's online mortgage calculator shows mortgage insurance costs more than $28,000 on a $722,000 house with a 5 per cent deposit of $36,000.
The standard 20 per cent deposit would be $144,000.
The 2287 postcode covering Fletcher, Wallsend and Elermore Vale had the state's third highest number of FHLDS participants in the first six months of the scheme to June 30, 2020.
The median house price in Newcastle has risen $138,000 since that date. Prices are up almost $500,000 in Merewether since the COVID lull a year ago.
The government announced in the May budget that it would release 10,000 more places in each of the FHLDS, the New Home Guarantee and the Family Home Guarantee from July 1.
The cap for the New Home Guarantee, which is similar to the FHLDS but for people buying new houses, off the plan or house-and-land packages, will remain at $950,000 in Newcastle and Lake Macquarie after July 1.
The FHLDS is available to those who earn less than $125,000 a year, or couples who earn less than $200,000 in total.
The Family Home Guarantee is a new program for single parents with dependent children.
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