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The Real Estate Institute of Queensland (REIQ) has welcomed new banking regulation changes to improve access to home loans for young Australians with student debt.
The reforms will also provide greater financing options for small developers unable to secure full pre-sale commitments.
Announced by the federal Treasurer, the reforms are supported by updated guidance from the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).
APRA’s mortgage serviceability assessment evaluates a borrower’s ability to meet loan repayments if the Reserve Bank of Australia (RBA) increases the cash rate by 3 percentage points above its current level of 4.35 per cent.
The reforms will allow HECS/HELP debts to be excluded from mortgage serviceability assessments in specific cases while maintaining responsible lending protections.
Antonia Mercorella, chief executive officer of the REIQ, said the changes could help first home buyers struggling to enter the market.
“We support this reform which will boost the borrowing capacity of Australians with student loan debt and trust that it will aid first home buyers in taking that crucial first step onto the property ladder,” Mercorella said.
The Property Council of Australia also welcomed the measures, with chief executive Mike Zorbas emphasising their potential to increase housing supply and affordability for young Australians.
“Many Australians need more apartment living options around jobs, opportunities and transport,” Zorbas said.
“Australian apartment construction is half the volume it was in 2017–18.”
Zorbas noted that while mortgage access should not be limited to high-income earners, overly restrictive lending regulations have hindered new housing developments.
“We have been warning federal and state governments that investment settings in the high-density living they say they want are actually a handbrake on new construction,” Zobras said.
“The next step is for state governments to revise down the foreign investment over-taxes that stop projects getting to critical lending mass.”
The reforms come as financial markets anticipate a potential interest rate cut ahead of the RBA’s upcoming meeting. However, Mercorella cautioned borrowers to consider their long-term ability to service loans.
“When taking out a loan, it’s important to not just think about what interest rates are today but consider whether you’re going to be able to service that mortgage in the event that interest rates go up,” she said.
“It’s easy to get swept up in the excitement of buying a home, but it’s important to think realistically about what you can manage long term, so that you are able to service that mortgage even if interest rates change or your personal circumstances shift.”
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