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The Boost to Buy scheme, which entered its second application round last week, aims to help more first home buyers overcome the deposit and repayment hurdle on properties worth up to $1 million.
Boost to Buy allows eligible first home buyers to enter the market with a minimum 2 per cent deposit, with the state taking an equity stake of up to 30 per cent on new builds and up to 25 per cent on existing homes.
The scheme operates as a shared equity model, meaning the government’s contribution is repaid based on the property’s future market value, rather than the initial amount invested.
This places it alongside the federal Help to Buy program, although there are differences in income thresholds, contribution levels, and overall scale.
“We are delivering more Queenslanders a place to call home through Boost to Buy,” said Treasurer and Minister for Home Ownership, David Janetzki.
“This builds on our goal for construction of 1 million homes over the next 20 years by making home ownership affordable for more Queenslanders.”
Limited scope and scale
One initial issue with the scheme in its current form is that just one lender – Unity Bank – facilitates it.
Although the government has indicated that more lenders could be added, brokers have noted the issues associated with having only one lender involved.
“Having only one lender significantly limits the scheme’s effectiveness and creates a bottleneck if that lender doesn’t suit the client,” Kit Johnson, franchisee for Aussie in Forest Lake, said.
“It also feels disconnected from how the market actually operates. Brokers facilitate the majority of home loans in Australia, yet many don’t have access to that lender through their aggregator.
“As a result, the scheme becomes difficult to access in practice, ultimately limiting its reach and beneficial impact.”
Lewis Johns, investment lending manager and mortgage broker for The Australian Lending and Investment Centre, also noted that one lender reduces competition.
“You’re stuck with Unity Bank because they’re the only one that will touch this. How competitive is Unity Bank going to be in the future? You’ve completely lost your ability as a consumer to shop around if you stay in the scheme,” Johns said.
Johns added that the scheme would only be extended to a few thousand borrowers.
He said: “The government likes to come out with these announcements to make it look like they’re helping first home buyers, but the devil’s in the details on this.
“I think there’s something like over 125,000 first home buyer loans that get done across Queensland each year, and this particular scheme, they’ve announced something like 2,000 places over a period of three years.
“They’re scratching the surface. There’s a very narrow window of people that this is going to actually assist, who are in the income category and won’t use the 5 per cent Deposit scheme.”
Given the small numbers involved, Johns said it was unlikely that larger lenders would come on board.
“I don’t think that other banks would want the headache of being involved with this for the sake of such a small segment of the market who can actually access the scheme,” he said.
“It’s a complete and utter waste of time.”
Shared equity issues
Johns said that there are broader structural issues with shared equity schemes, including the federal government’s Help to Buy Scheme, which operates similarly to Boost to Buy.
“In my own opinion, I fundamentally disagree with them (shared equity schemes), because then the government has a share of the equity in your house,” Johns said.
“And as the value of your house goes up each year, the amount of money that you owe the government is increasing, meaning borrowers may need to take on additional debt to buy out that stake over time.
“Yes, it’s going to help some people get into the market, but it also puts them in a tight spot, as they now have a growing obligation to the government that must eventually be repaid through a sale or refinance.”
Johns noted that the shared equity structure may introduce complexity for borrowers over time, particularly as their financial position evolves, and they look to leverage their property.
“What happens when situations change? They might want to try and refinance it and move to a different bank to get a better rate. They might want to draw some equity out to renovate a house or buy the next property. They might want to use this as an investment and then go and upgrade and get a bigger house,” Johns said.
“How do you do all these things when the government is still sitting there with a second mortgage on the title and their debt has grown? Effectively, it doesn’t look like there’s any option to even change banks.”
Johnson added: “Shared equity schemes introduce additional complexity and long-term considerations that many clients are cautious about.
“As with most government schemes, borrowers rely heavily on brokers to explain the structure and implications. That’s why a limited rollout, particularly with only one lender and minimal broker integration, feels like a massive missed opportunity.”
Both brokers noted that the 5 per cent Deposit Scheme, which currently has over 30 lenders on board, is a far more popular choice for borrowers.
Johns said that he hadn’t had a single client inquire about the Boost to Buy scheme.
Johnson added: “In my experience, most clients don’t fully understand the shared equity component at first. Once it’s explained, many become hesitant, particularly around the idea of the government sharing in future capital growth.
“The Five per cent Deposit scheme tends to be more widely used because they’re simpler and supported by multiple lenders.”
[Related: ‘Dangerous’ policy changes could bring investor exodus]
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