Single Mum's Nightmare: How a Government Housing Scheme Led to Three Jobs and a Share House

The Barefoot Investor Scott Pape has delivered a scathing assessment of the government's low deposit home schemes after a single mum who relied on it has been left working three jobs and living in a share house with her daughter.

Low deposit schemes rolled out by the federal government have made it possible to purchase with as little as a 2 per cent deposit. But alarm bells are ringing over the initiatives as property prices cool, and changes to negative gearing and capital gains tax are expected to slow price growth by about 2 per cent.

Pape said the policy was "always doomed to fail" and shared the story of a single mum, Fiona, who purchased an apartment with a 2.5 per cent deposit using the low income single parent deposit scheme.

But the rise in interest rates and the cost of living, along with higher strata and council rates, meant Fiona found she could no longer keep up with her mortgage and couldn't afford to keep living in the apartment.

Fast forward two years, and Pape said Fiona was still on the treadmill trying to keep up.

"She's working three jobs. Her daughter is picking up retail shifts after school. The unit is rented, but between repayments, rates and strata there's not much left. They're in a share house now," Pape said in his latest column.

Pape said Fiona didn't have dreams of becoming rich, but simply wanted safety and security and to give her daughter a better life. So she "took the bait" and had borrowed 97.5 per cent for the apartment.

"The trouble was, what she bought wasn't security. It was debt," Pape said.

"And debt and security are not the same thing. Not even close. Debt means you have to keep working no matter what. Security is when you don't have to.

"Debt keeps you on the treadmill puffing and panting, and interest rates and the cost of living keep bumping the speed up."

Falling house prices send alarm bells ringing

Flatlining property prices have brought the government's low deposit home schemes back into focus as some who have recently bought risk falling into negative equity, where they owe the bank more than their home is worth.

Sydney house prices are 2.1 per cent below their peak in November last year, the latest Cotality data has revealed, while Melbourne prices are down 2.9 per cent.