Brokers need to be included in Help to Buy scheme: MFAA

The long-awaited Help to Buy Scheme – first announced by the Albanese government in 2022 as part of the Safer and More Affordable Housing measure – is a shared equity scheme that aims to support up to 40,000 Australian households to purchase a home of their own.

Under Help to Buy, low- to middle-income earners will only be required to have a deposit of 2 per cent (or more) to qualify for a standard home loan with a participating lender without needing to pay lenders mortgage insurance (LMI).

The Commonwealth would provide an equity contribution to eligible participants for up to 40 per cent of the purchase price for new homes and up to 30 per cent for existing homes, which will be recognised as a second mortgage (or other right secured against the property).

The scheme – which will be administered by Housing Australia – will be means-tested (income limits are $90,000 for singles and $120,000 for couples) with property price caps for each city and region.

It aims to help more people into the property market, sooner – as it currently takes, on average, a decade to save for a house deposit in Australia (according to CoreLogic).

The Help to Buy Scheme Bill 2023 and the Help to Buy (Consequential Provisions) Bill 2023 are currently being read a second time in Parliament and have been referred to the Senate economics legislation committee for inquiry and report by 16 April 2024.

In its submission to the committee, the MFAA outlined that while the broker association “welcomes and supports” the bills and believes the scheme will “positively increase home ownership rates for Australians”, it emphasised that brokers need to be included as a distribution channel.

Naveen Ahluwalia, the MFAA’s executive, policy and legal, wrote: “Brokers play a critical role in intermediated lending, providing access to credit and promoting choice in both consumer and business finance.

“Brokers facilitate more than two-thirds of all new residential home loans and approximately four out of 10 small-business loans in Australia ... we wish to emphasise the importance of ensuring that prospective Scheme applicants have access to a mortgage broker to facilitate financing the remainder of their home purchase price.

“It is critically important that the design of the Scheme provides for prospective home buyers to utilise the services of mortgage brokers,” suggesting that this could be achieved by ensuring “a diversified panel of participating lenders”, which include lenders to utilise the broking channel to receive home loan applications, and ensuring that those participating lenders provide for home loan applications to be made through brokers.

“The increasing reliance by consumers on broker services can be demonstrated, particularly in the increase in mortgage broker market share, with 71.5 per cent of new home loans in Australia now originating through the broking channel.

“The number of first home buyers is also on the rise, in October 2023 increasing nationally 6.8 per cent when compared to October 2022.

“With more consumers actively seeking a home, there is a reliance on mortgage brokers for the choice, experience and convenience that a broker provides…

“It is important therefore that those who are looking to access the Scheme have the choice to do so through mortgage brokers. As a result, ensuring that lenders participating in the Scheme are those that consumers can access through mortgage brokers is critical to supporting competition and choice for the benefit of consumers.”

The MFAA flagged that mortgage brokers already “extensively assist home buyers”, particularly first home buyers, to access other government schemes such as the Home Guarantee Schemes (with brokers having facilitated 72 per cent of loans in the New Home Guarantee in 2022).

While the Help to Buy Scheme has been touted by the government as being a key policy for helping overcome financial barriers to home ownership, concerns have been raised that the scheme may contribute to further growth in house prices given the fact that they will further stoke demand and divert resources from supporting people who are homeless or at risk of homelessness (including because of rental stress).

While many states already operate their own shared equity schemes, they will need to pass their own enabling legislation in order for the federal Help to Buy to operate in their jurisdictions (while the scheme will operate in the territories following the passage of the Commonwealth legislation).

All the states and territories agreed at the national cabinet meeting held in Brisbane last year to progress legislation so the scheme could run nationally from this year.

[Related: Timeline set for Help To Buy scheme]