Coalition set to order Australia’s financial regulator to slash home loan buffer if elected, make home buying easier

The Coalition announced it will order the financial regulator to soften the home loan buffer.

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The Coalition will order the nation’s financial regulator to soften the home loan buffer to help more homebuyers get a foot into the property market if elected.

The Opposition promised it would direct the Australian Prudential Regulation Authority (APRA) to lower its home loan serviceability buffer, which is a higher interest rate figure used to assess whether borrowers can service their loans if interest rates increased.

And they will also require APRA to loosen other regulations around home deposits and lender’s mortgage insurance.

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Shadow Housing Minister Michael Sukkar told the Property Council’s National Housing Solutions Summit in Melbourne that Australians were punished with higher borrowing costs if they didn’t have the support of the bank of Mum and Dad, even when their risk was the same or lower.

“We’ll reform the financial system to provide better productivity, unlock investment and of course to support aspiration,” Mr Sukkar said.

“There’s clearly a systemic bias in favour of inherited wealth, and so we’ll remove it.

“Labor’s financial system is locking too many Australians out of home ownership, not because they can’t afford the mortgage, but because the rules are just too inflexible.”

Shadow Housing Minister Michael Sukkar said there was a systemic bias in favour of inherited wealth in Australia’s housing system currently.

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APRA raised the serviceability buffer from 2.5 per cent to 3 per cent in October 2021 when the Reserve Bank of Australia increased interest rates during the pandemic, and from 2 per cent to 2.5 per cent in 2014, anticipating further rate hikes.

Housing Industry Association (HIA) managing director Jocelyn Martin said the proposal to review mortgage lending rules and the serviceability buffer tilted the scales back towards supporting first-home buyers into home ownership.

“(This) is a strong and timely response to one of the most significant barriers to home ownership,” Ms Martin said.

“HIA has consistently raised concerns about lending regulations that no longer reflect today’s economic reality.

“The current settings — particularly the 3 per cent serviceability buffer — are unnecessarily restrictive and are keeping people out of homes they could otherwise afford.”

HIA managing director Jocelyn Martin said adjusting mortgage lending rules was a strong and timely response to one of the most significant barriers to home ownership.

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She added that access to finance was one of the most significant barriers holding back more Australians into housing.

This comes after the Coalition unveiled its housing policy last week centred around four pillars – to assist with the deposit hurdle, help with serviceability and access to finance, and using the Commonwealth government’s balance sheet to drive supply and reduce regulation.

“Under this Labor government over the past three years, first-home buyers have plummeted,” Mr Sukkar said.

“Home completions have dropped. Approvals for new homes have also crashed,” he said.

“Despite the so-called $33B of investment into housing, not a single new home has been delivered as a result of a Labor housing policy.

“On virtually every single metric possible housing has gone backwards under this government.”

Federal Housing Minster Clare O’Neil said housing was going to be one of the defining issues of Labor’s election campaign.

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Federal Housing Minister Clare O’Neil said housing was going to be one of the defining issues of Labor’s election campaign.

“We’ve got a housing crisis on our hands that has been building for a generation,” Ms O’Neil said.

“Our country is more unstable and more uncertain just because of what is happening in housing.

“We had a Coalition government that for a decade, basically withdrew from housing altogether.”

She added that the Coalition was having an “identity crisis” going into the election promising higher taxes for every Australian taxpayer and higher taxes for new homes in the middle of a housing crisis.

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sarah.petty@news.com.au