Will Labor’s home-buying scheme help brokers?

A Sydney broker has welcomed Labor’s plans to boost home ownership through its Help to Buy scheme saying any initiative to help home buyers was a good thing.

“It [buying a home] has certainly become more difficult over time with rising property prices, cost of living pressures and now the expected increase in interest rates,” said Fin Secure managing director Kristy Alam (pictured).

Ahead of the 2022 federal election, Opposition Leader Anthony Albanese said if elected his government would cut the cost of buying a home by up to 40% for 10,000 Australians each year.

The proposed Help to Buy scheme would be available to Australians with a taxable income of up to $90,000 (individuals) and up to $120,000 (couples). When the house sells, a Labor government would recover its equity and share of the capital gain.

“An Albanese Labor government will provide eligible homebuyers with an equity contribution of up to 40% of the purchase price of a new home and up to 30% of the purchase price for an existing home,” Albanese said.

“The homebuyer will need to have a deposit of 2% and qualify for a standard home loan with a participating lender to finance the remainder of the purchase.”  

Read more: FinSecure offers new solution to help first home buyers

Alam said whether you were a first home buyer or previously owned a home before, the proposed Help to Buy Scheme might be a solution for low to modest income earners who had little deposit and a need for a lower mortgage repayment.

“The scheme provides an option for a specific cohort of borrower that otherwise wouldn’t have been eligible for a mortgage,” she said.

“It allows mortgage brokers the opportunity to provide a solution and assist the borrower with achieving their dream of home ownership.”

With many unknowns around the scheme, in particular the participating lenders, Alam questioned how the scheme would be managed.

“A shared equity option is certainly not as straightforward as the existing home guarantee schemes that are in place. Similar equity schemes have and are in place in states such as Western Australia, however with limited funding options.”

Read more: Higher property prices boost owners’ equity

Alam said the scheme appeared to be a beneficial solution for Australians perhaps in the middle of their lives, who were low to modest income earners wanting to plan for their future.

“Without such help from the government offering a shared equity scheme, they would more than likely be renting into their retirement,” she said.

“This scheme could provide a long-term investment solution whereby the borrower can enter the property market with as little as 2% deposit, have a lower loan amount and lower mortgage repayments, while still owning the majority of their home.”

Alam said if Labor won the upcoming election, brokers should review their client database and reconnect with clients that previously did not qualify for other government schemes.

“Spots will be limited to 10,000 expected each year, therefore identifying the clients this might suit early will be of benefit to the broker.”

Alam said this scheme, along with the existing home guarantee schemes and introduction of the Regional Home Guarantee Scheme, might keep demand strong at those price caps, despite expected interest rate rises.

“We saw this previously when the first home owner grants doubled, it did heat up the market.”