Government-backed home loan scheme could leave the government exposed to losses of hundreds of billions of dollars
One Nation has drawn criticism from economists over a proposal to offer 30-year fixed-rate home loans at 5% through Australia Post, funded by scrapping the Albanese government's $11.5 billion Housing Australia Future Fund.
Economists warn the true cost of the plan could run into the hundreds of billions of dollars, far exceeding its stated funding envelope.
Under the proposal, spearheaded by One Nation senator Malcolm Roberts and first disclosed in the AFR, borrowers would need a 5% deposit – which could be drawn from superannuation or a first-home buyer grant – to access the below-market rate.
That would undercut traditional lenders significantly, with the average rate on new owner-occupier loans currently sitting above 6%.
Richard Holden, an economics professor at UNSW, told The AFR the funding required could be 10 to 50 times the proposed $11.5 billion, as borrowers would likely rush to refinance into the cheaper government-backed loans.
He added that "governments just aren't very good at running commercial enterprises”.
Challenger chief economist Jonathan Kearns raised separate concerns about taxpayer exposure during a housing downturn, questioning whether the policy accounts for potential losses if borrowers default and properties are sold at a discount.
Party unity in question
The proposal also exposed divisions within One Nation. Treasury spokesman Barnaby Joyce described it as "a discussion piece" rather than settled policy, while party leader Pauline Hanson insisted the cost was capped at $11.5 billion, dismissing the higher estimates as manufactured by the media.
Hanson said "that money has already been spent in the Budget" and was simply being reallocated.
How the US model compares
Long-term fixed-rate mortgages are the default option in the US, unlike Australia's overwhelmingly variable-rate market.
The 30-year fixed-rate loan has been the standard product since the Great Depression era and remains dominant today, with Freddie Mac noting the US mortgage market continues to be led by fixed-rate products, even as adjustable-rate loans see a modest uptick among larger, non-conforming loans.
Locking in a rate for three decades means repayments stay level regardless of what happens to interest rates in the meantime, offering protection against the kind of rapid rate rises Australian borrowers experienced through 2022 and 2023.
The structure also spreads repayments over a longer term, keeping monthly costs lower relative to income and helping borrowers qualify for a larger loan than a shorter or variable-rate product might allow.
The trade-off is that US fixed rates are typically set higher than variable rates at origination, reflecting the additional risk lenders take on by committing capital for decades.
That model is underpinned by a deep secondary market – through Fannie Mae, Freddie Mac and Ginnie Mae – that lets American lenders offload long-term interest rate risk in a way Australian banks generally cannot.
