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The Labor party is proposing a new scheme that would help cut the costs of homebuying by up to 40% through a shared equity arrangement.

The Help to Buy scheme is Labor party’s key housing policy for the election campaign and is aimed at helping 10,000 Australian homebuyers each year achieve homeownership.

How will the scheme work? 

Under the proposed scheme, the government would provide eligible borrowers 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.

Under this 'shared equity' arrangement, successful applicants would essentially be co-buying with the government. You would own 60-70% of the value of the property, while the government would own 30-40%. However, successful applicants can buy an additional stake in their home if they are able to do so during the loan period. They will not be required to pay rent on the stake of the home owned by the federal government.

Eligible homebuyers must qualify for a standard home loan with a participating lender and will only need a deposit of 2%. The scheme waives Lenders Mortgage Insurance (LMI), which means the homebuyer can save up to $30,000 more on housing costs.

Property price caps would be set in each region. The table below shows the potential saving on new and existing home purchases:

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Are there eligibility requirements?

The scheme is geared to helping Australians on low and modest incomes to buy a home with a smaller mortgage.

There will be 10,000 slots per financial year, which will be available for Australian citizens who do not currently own or have an interest in residential dwelling. The scheme will not be restricted to first-home buyers.

It will be available to Australians with a taxable income of up to $90,000 for individuals and up to $120,000 for couples.

Is the Help to Buy a good scheme?

Finance Minister Simon Birmingham said the proposed scheme would help fewer people than the existing New Home Guarantee scheme.

“Our policies are working, it is helping now really lift the rates of first home ownership, it is delivering outcomes for Australians and importantly you get to own your own home,” he said in an interview with ABC.

Greens Leader Adam Bandt also had concerns about the scheme, saying the proposal “would not even touch the sides on the housing affordability front". 

However, Wealthi co-founder Domenic Nesci described the scheme as a 'creative' and 'good policy' that would help people break into the housing market.

“I think it's good because it stimulates the property market, especially coming into a higher interest rate environment,” he said.

Furthermore, Nesci said the policy allows people to get in and buy property while at the same time driving up property prices.

“In some areas, we may actually see pressure on the market and property values — there will probably be increases particularly under that sort of threshold of $950,000 in New South Wales and $850,000 in Melbourne,” he said.

Still, Mr Nesci said this will provide a significant boost especially as buyers start to put affordability and long-term growth as their top consideration.

“The upper part of the market has started to drop, and the middle part of the market is starting to drop, but the lower part of the market, the most affordable part of the market, has been resilient,” he said.

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Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
Filters
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
$2,408
Principal & Interest
Variable
$0
$530
70%
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5.99% p.a.
5.90% p.a.
$2,396
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
$2,434
Principal & Interest
Variable
$0
$250
60%
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5.95% p.a.
5.95% p.a.
$2,385
Principal & Interest
Variable
$0
$0
90%
5.94% p.a.
5.95% p.a.
$2,383
Principal & Interest
Variable
$0
$0
90%
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

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Photo by @soroushkarimi on Unsplash

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