Jess Phillips says the small number of lenders mean the launch of the long awaited program will come with some ‘restrictions’. (Source: TikTok/the.finance.emporium/Getty)
The Australian federal government’s long-awaited scheme to help low and middle income earners into the property market officially begins tomorrow. The government – or more accurately the Australian taxpayer – will take up to 40 per cent ownership in a new property to facilitate the sale.
That means, buyers will only need a tiny 2 per cent deposit to get their toe onto the property ladder. The shared equity policy was flagged by Labor years ago, but despite the long lead time, it is launching Friday with just two participating lenders.
While more are expected to join, it’s just the Commonwealth Bank and Bank Australia that are signed up. Currently they’re the only lenders willing to join a housing ménage à trois with the government and the first home buyer.
“This is where it’s going to become a little bit annoying,” mortgage broker Jess Phillips told Yahoo Finance.
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“I had this case, literally a couple days ago, where Bank Australia don’t give as much borrowing capacity as CBA.”
While Bank Australia offers better rates, it is more restrictive with its policies and assessments of the borrower, meaning the client really only had one potential option.
“Which is why it’s crazy that only two lenders have agreed to do it so far,” Philips said.
“I’m not actually sure why more haven’t come on the panel with the launch, but there will definitely be more come on in the future.”
Commonwealth Bank is also only accepting Help to Buy applicants through its in-house channels, and not through mortgage brokers.
Shared equity scheme ‘won’t appeal to everybody’
Phillips is the director of the Finance Emporium in Darwin and mainly helps first home buyers into the market. She has seen “some interest” in the scheme in the Top End, but noted the price cap for the state of a $600,000 property, which is among the lowest, will make it tricky for many local families trying to use the scheme.
“The NT is actually more expensive than what you would think,” she said. To get a nice home here for a family of four or a family of five… you’re looking at upwards of $650,000.”
The price caps on eligible properties (full list here) differ from cities to regional parts of a state and range from as low as $500,000 (in regional South Australia) to $1.3 million in Sydney.
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The government will buy as much as 30 per cent of an existing home and 40 per cent of a new home alongside the much smaller contribution from the first home buyer.
Phillips said it’s an open question as to “whether or not it’s a good plan for [the first home buyer] or not”.
“But if it helps them to get out of the rental cycle and into their own home, then you know, it’s a great scheme for them,” she said.
“It won’t appeal to everyone, obviously, but some people are really dependent on it.”
The NT mortgage broker believes the scheme will be a great benefit for those it is intended to help. (Source: Finance Emporium/Facebook)
Similar programs have been rolled out overseas and at a state level in Australia. Over the next four years, the federal government hopes it will help 40,000 buyers into the housing market, with 10,000 spots available each year.
While you don’t have to be a first home buyer, you can’t currently own a home domestically or overseas.
The income caps to claim one of those spots are $100,000 for a single person, and $160,000 for couples and single parents.
But if down the track, buyers exceed those income caps for consecutive years, that would trigger a review of their situation and they might need to refinance and begin paying back the government’s portion, Phillips said.
“I don’t believe that actual detail is 100 per cent clear yet,” Phillips said. “All they have really stated is that this is a scheme that’s going to have to be regularly reviewed by the client and the government.”
According to Housing Australia’s website, the amount paid back to the federal government “will always be based on the value of the property at the time of making the payment”.
A spokesperson from Housing Australia told Yahoo Finance that the home valuations “are typically conducted by a registered, certified independent valuer. When a lender is involved, such as during an application or refinancing, the valuation provided by the lender’s appointed valuer will be used. In all other cases, Housing Australia will engage an accredited valuation firm to complete the property assessment.”
Phillips said those interested in the scheme should head to the Housing Australia website where there is an eligibility calculator and specific details depending on where you live.
Sydney mortgage broker Nathan Linton recently told Yahoo Finance he has seen growing interest in the program recently.
“I’m having a lot of conversations about the Help to Buy scheme,” he said, adding he’s got a “growing list of families” hoping to take advantage of the new program.
In a statement ahead of the launch, Commonwealth Bank’s Angus Sullivan said the country’s biggest lender was “pleased” to be supporting the scheme.
“We know it can be challenging for first home buyers or someone returning to the market to take that step onto the property ladder,” he said.
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Houses in regional Victoria have a price cap of $650,000. Melbourne’s cap is $950,000. · Getty Images