Help to Buy scheme and changes to how lenders consider student debt

More Australians on lower and middle incomes will be able to enter the property market sooner, after the federal government expanded the Help to Buy scheme in its annual Budget.

What is the Help to Buy scheme?

Help to Buy – which is earmarked to begin later this year – will allow eligible buyers to enter the market with just a 2% deposit, without paying lenders mortgage insurance. The government will take an equity stake in the property, of up to 30% for an established home and up to 40% for a new home. This means the homeowner will have a smaller mortgage and smaller repayments.

The homeowner will then pay down the government’s equity over time, or when the property is sold.

What is the eligibility criteria for the Help to Buy scheme?

To be eligible for Help to Buy, participants’ annual income and the value of the property they purchase must be below a certain threshold. 

The income caps are $100,000 for individuals and $160,000 for joint applicants and single parents.

Other criteria include:

  • Must be an Australian citizen
  • Must be at least 18 years old
  • Must live in the property (investment properties are not eligible)
  • Not own any other property or land when you apply

What are the property price caps for the Help to Buy scheme?

The price caps – which vary from location to location have been linked with the average house price (rather than the average dwelling price) in each state and territory, so that more than 5 million properties now fall under the new price caps.

State Capital/regional centre Rest of the state

New South Wales

$1,300,000

$800,000

Queensland

$1,000,000

$700,000

Victoria

$950,000

$650,000

South Australia

$900,000

$500,000

Western Australia

$850,000

$600,000

Tasmania

$700,000

$550,000

Australia Capital Territory

$1,000,000

Northern Territory

$600,000

Source: Federal Budget 25/26

Help to Buy is budgeted to help 40,000 people over four years. To support the extensions to the scheme, the government has increased its equity investment from $5.5 billion to $6.3 billion.

The government said Help to Buy would open for applications later this year, following registration of the Program Directions, passage of state legislation and implementation by Housing Australia.

“Help to Buy takes years off the time it takes to save for a deposit. And first home buyers on average rates with a $519,000 home will save about $900 per month when buying an existing home, and $1,200 per month when buying a new home,” according to the government.

Changes to how lenders view student loans

The financial services regular, ASIC, has issued new guidance around the way lenders consider student loan commitments, which should make it easier for younger Australians to qualify for mortgages.

It comes after Treasurer Jim Chalmers called on ASIC and the banking regulator, APRA, to change their guidance to lenders, so they could be more flexible in how they treated HELP-HECS debt.

As a result, ASIC has updated Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209), by adding two new paragraphs.

The first new paragraph says: “HELP debt, such as HECS-HELP or a FEE-HELP loan, is different from other debt, because whether a consumer needs to start repaying the loan and the amount that is repaid, are both contingent on the consumer’s income. These loans may therefore be considered differently by a lender from other consumer debts.” This acknowledges that while a typical loan needs to be paid immediately and consistently, student loans need to be repaid only when the borrower’s annual income crosses a certain threshold (currently $54,435); and that repayments pause if the borrower’s income drops below that threshold.

The second new paragraph says: “Lenders may also choose to consider the circumstances of the consumer’s outstanding HELP debt. In particular, after taking into account the remaining HELP debt the consumer owes, the expected time period to repay the debt and the anticipated term of the proposed loan, a lender may consider it appropriate not to factor in an applicant’s HELP debt when calculating a consumer’s outgoings.” This means lenders may be able to exclude student loan repayments from their serviceability assessments when borrowers have almost repaid their loans.

Broader lending policies remain unchanged

“The Government’s program of reforms aims to improve access to credit and help more first home buyers get on the property ladder,” ASIC said in a statement announcing the change.

“The update acknowledges that HELP debts are different from other forms of debt because the amount that is required to be repaid depends on a person’s level of income.

“The update is limited to the treatment of HELP debts in lending assessments. It does not change broader lending policies or responsible lending obligations.

“It aims to provide clarity on the nature of HELP and student loan repayments and how lenders may consider HELP debts when undertaking responsible lending assessments.”

To find out if you may be eligible for government incentives to purchase your first home, reach out to your Loan Market broker.

 

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