‘Overly cautious’: Coalition pledges to relax lending rules to boost home ownership

The Coalition will ease property lending rules to help homebuyers get onto the property ladder sooner, says shadow federal housing minister Michael Sukkar. 

It’s the latest election promise from the Coalition aimed at helping first-home buyers get into the property market, as housing affordability looms large ahead of the May 3 federal election.

Speaking at the National Housing Solutions Summit in Melbourne on Tuesday, Mr Sukkar said the Coalition would make it easier for first-time borrowers to get a mortgage.  

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

“We will make it clear that APRA [Australian Prudential Regulation Authority] must consider the impact of its rules on access to housing, particularly for first-home buyers.   

“That means reducing the overly cautious serviceability buffer, which was introduced when rates were near zero but remains unchanged even as the cash rate sits above 4%. 

“This one-size-fits-all rule is stopping tens of thousands of Australians from getting a home loan – even when they can meet the repayments with a prudent margin against unexpected future rates rises.” 

The Coalition has pledged to ease property lending rules to help homebuyers get onto the property ladder sooner. Picture: Getty 

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Under the plan, the Coalition would make APRA reduce the serviceability buffer to make it easier for first-time borrowers to secure a mortgage.  

The financial regulator requires banks to add a safety buffer when considering whether someone applying for a home loan will be able to make their loan repayments.  

The buffer is currently set at a rate of 3% above the loan interest rate. 

The serviceability buffer was raised to 3% when the official cash rate fell to 0.1% during the pandemic. 

It would also require APRA to adjust the capital treatment of loans backed by lenders mortgage insurance (LMI) through the statement of expectations. 

The Coalition would call on APRA to change how mortgages backed by LMI were treated, so that people without “the bank of mum and dad” avoided higher borrowing costs. 

The lending promises have been welcomed by banks and property groups.

“The proposal to review mortgage lending rules and the serviceability buffers to tilt the scales back towards supporting first home buyers into home ownership is a strong and timely response to one of the most significant barriers to home ownership,” Housing Industry Association managing director Jocelyn Martin said.

Shadow housing minister Michael Sukkar speaking at the National Housing Solutions Summit. Picture: Supplied

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“Access to finance is one of the most significant barriers holding back more Australians into housing and with home ownership rates at record low levels, we need all levels of governments and all parties to look at all options to reverse this worrying trend.”

The Coalition is taking numerous housing promises to the election, including its super-for-housing pledge, a $5 billion housing infrastructure fund and migration cuts.  

The lending pledge comes as the Reserve Bank held interest rates at 4.1% on Tuesday after cutting rates at its previous meeting.