Help to Buy launches for low-income buyers

Australia’s Help to Buy scheme will begin operating today in most states and territories, offering a shared‑equity pathway into home ownership for eligible lower‑income households.

Under the program, the Commonwealth will co-purchase a dwelling with an eligible buyer, taking an equity stake of up to 30% on established properties and up to 40% on new constructions. The government’s contribution is structured as shared ownership rather than a grant, giving the state a proportional claim on sale proceeds.

The scheme was first announced in 2022 and is capped at 10,000 places a year. Income thresholds apply: up to $100,000 for single buyers and up to $160,000 for joint applicants and single parents. These limits are indexed annually to wage growth. Participants’ incomes are reviewed every five years.

Participants must contribute at least a 2% deposit based on the purchase price but are exempt from lenders’ mortgage insurance. The program is open to buyers who do not currently hold a property interest in Australia or overseas, with some exceptions for single parents. It is not confined to traditional first home buyers.

Help to Buy is available in most jurisdictions, though Western Australia and Tasmania have yet to pass enabling legislation and will not participate at the outset.

How the structure affects borrowing and purchasing power

The government’s equity share does not increase a borrower’s nominal servicing capacity; instead, it allows an eligible buyer to target a higher-value property than would otherwise be affordable on the same income and borrowing limit.

Research from Canstar.com.au indicates that a borrower on a $90,000 income taking a 30-year mortgage with Commonwealth Bank at 5.64% could borrow about $438,000, regardless of whether they use Help to Buy or the separate Home Guarantee scheme.

Under Help to Buy, if this borrower contributes a 2% deposit of $12,882 and the government provides a 30% equity contribution, the purchaser could acquire a property priced at about $644,117, excluding stamp duty and transaction costs. By contrast, under the Home Guarantee scheme, the same borrower would need a 5% deposit of $23,053 and would be limited to buying a property worth about $461,053 on the same servicing assumptions.

^{Source: Canstar.com.au}

Advantages for eligible borrowers

Compared with a standard loan outside the scheme, Help to Buy can reduce the size of the mortgage and lower monthly repayments because the government takes on a portion of the purchase price as equity. This may increase the likelihood of loan approval for lower‑income applicants because their required loan size is smaller.

Participants avoid lenders’ mortgage insurance, which can otherwise add thousands of dollars in upfront or capitalised costs. Borrowers are not charged rent on the government’s equity share. Over time, they may buy back part or all of the government’s interest if they are able to refinance or make lump-sum payments.

The scheme is open to a broader group than traditional first home buyer programs, extending to anyone who does not currently own residential property, subject to the eligibility rules.

Key risks and constraints

The shared-equity structure also imposes limitations that mortgage professionals will need to explain clearly to clients.

Because the government holds an ownership stake, any capital gains realised on sale are shared in proportion to the equity split. If the property is sold, the Commonwealth will be entitled to its percentage share of the sale price.

Help to Buy is designed for owner-occupiers only. If a participant needs to move out, they may have to sell the property unless they can refinance or otherwise fund the purchase of the government’s share and convert to full ownership.

At launch, only two lenders are participating: Commonwealth Bank of Australia and Bank Australia. This restricts product choice, rate competition and feature sets for borrowers using the scheme and may limit brokers’ ability to recommend alternatives within the program.

The low-deposit structure increases the risk of borrowers entering with higher loan-to-value ratios. If property prices fall, participants could face prolonged periods of limited equity and reduced flexibility to refinance or switch lenders, while remaining locked into a co-ownership arrangement.

Income growth may also trigger obligations. If a borrower’s income rises above the relevant cap for two consecutive years, they may be required to buy back at least part of the government’s equity share, potentially increasing their debt burden at that point.

Finally, the overall scale is constrained: only 10,000 places are available nationally each year, and the scheme is not currently operating in Western Australia or Tasmania.

A lifeline for aspiring homebuyers 

Sally Tindall (pictured right), data insights director at Canstar.com.au, said the program could provide a route into ownership for some households who have been priced out in recent years.

“Help to Buy could well be a lifeline for people who’ve been watching the first rung on the property ladder rise further out of reach,” she pointed out. “For some, this scheme will be the difference between renting indefinitely and finally getting the keys to their own home.”

Considering the scheme’s advantages and drawbacks, Tindall noted that while Help to Buy will bring more people into the market, it does nothing to address the structural affordability problems facing the country. It’s a helping hand for tens of thousands of households – not a silver bullet,” she said.

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