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.

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.

To be eligible for Help to Buy, the value of the property they purchase must be below a certain threshold.
The price caps – which vary from location to location – were recently increased. The new caps 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.

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 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 be able to exclude student loan repayments from their serviceability assessments when borrowers have almost repaid their loans.

Broader lending policies remain unchanged
“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,” ASIC said in a statement.

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

Find out your borrowing capacity
Please get in touch if you’re thinking about buying a property.
I can let you know your borrowing capacity and can help you determine whether you may be eligible for the Help to Buy scheme later in the year.

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