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The Coalition has announced it will look to change prudential settings, and adjust lending criteria to “support home ownership”, if the party is elected in the upcoming federal election.
Shadow treasurer Angus Taylor MP, and shadow assistant treasurer and shadow minister for financial services, Luke Howarth MP, have unveiled plans to reform Australia’s financial services to make it easier to access credit for home loans.
The Australian Prudential Regulation Authority (APRA) currently maintains an interest rate serviceability buffer at 3 per cent above the loan level, which is used by banks to assess whether loan applicants could withstand a 3-percentage-point rise in mortgage rates.
This serviceability buffer was introduced in October 2021 to ensure that banks lend responsibly in a range of economic scenarios, with APRA announcing in November of last year that it would leave the buffer unchanged due to “continued uncertainty in the outlook for the labour market, inflation and interest rates”.
In a joint media statement, the Coalition said it would look to adjust lending criteria to “support home ownership”, and ensure that “serviceability requirements reflect the interest rate cycle” if the party wins the upcoming federal election.
The Property Council of Australia has welcomed the Coalition’s announcement, with CEO Mike Zorbas stating a fresh look at balanced regulations would provide access to new homes when they are needed most.
“Regulatory frameworks need the flexibility to provide appropriate checks and equally enable the right volume of access to finance, and we welcome ideas that support this,” Zorbas said.
“A sensible safety net is important and within that frame so is ensuring as many Australians as possible can own their own homes.”
The Real Estate Institute of Australia (REIA) also welcomed the Coalition’s election pledge, with president Leanne Pilkington stating the serviceability change is especially necessary after the recent rate cut.
“With the recent rate cut and the expectation of more in 2025, the 3 per cent buffer is outdated,” Pilkington said.
“It is unnecessarily restrictive and limits the borrowing capacity of Australians at a time when affordability challenges persist.”
Pilkington also added that the move would particularly benefit first home buyers.
“A reduction in the serviceability buffer is essential, especially in assisting first home buyers who are disproportionately impacted by the current lending restrictions,” Pilkington said.
The Coalition’s announcement comes after the Labor government also revealed its plan to adjust lending rules.
Earlier this month, Federal Treasurer Jim Chalmers called on Australia’s regulators to update their guidance to make it easier for Australians with student debt to take out a mortgage and purchase a home.
The Labor government also recently announced it would implement a two-year ban on the purchase of established homes by foreign investors, in a move to ease pressure on the housing market.
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