Senate inquiry expected to recommend easing lending restrictions to help first home buyers

ABC NEWS (Australia)

An inquiry into home lending is expected to recommend several changes to help first home buyers. It could suggest easing lending rules which restrict how much money banks can loan out.

Transcript

00:00Some of the main recommendations are really around helping first home buyers get easier

00:08access to finance. And at the moment there's something called a mortgage serviceability

00:13buffer. So when you go to a bank and they offer you a variable interest rate, say that

00:17variable interest rate is 6%, the buffer is currently set at 3%. So the bank will assess

00:24you on your ability to repay the loan at 9%. So that's 6% plus 3%. 9% is the rate they

00:31assess you at. This inquiry is saying that serviceability buffer is too high. It's stopping

00:36first home buyers being able to get a loan. And so we should reduce that buffer. Now of

00:42course, APRA came out this week and said we should leave the buffer where it is. But this

00:47is likely to be what the inquiry calls for. And it's also likely to be the coalition's

00:54housing policy going into the federal election.

00:56Anasim, what are the arguments against easing lending rules?

01:01So the argument that APRA put and a lot of consumer groups had put to the inquiry is

01:08that the current buffer is good where it is. It's there to protect against risk in the

01:14system that is vulnerable Australians taking on too much debt. And we know interest rates

01:19have risen. We know that there are a lot of people already in mortgage hardship. And so

01:24their view is that this just increases too much risk in the system and leaves people

01:29more vulnerable to taking on too much debt and potentially then losing their homes.

01:34And are any other changes expected?

01:37Yes, so the inquiry is expected to make a number of recommendations. Another one will

01:43relate to APRA's mandate. So APRA currently has a mandate to protect financial stability

01:52and it focuses on the banks and the risks that banks take on. But it doesn't really

01:57look at first home buyers and their own home ownership prospects. So the inquiry is likely

02:03to look at that issue and whether the mandate needs to be updated. And there's also been

02:07suggestions to this inquiry about having co-ownership, co-home ownership models so

02:13that if you want to go in with a relative or a friend, the banks can make that possible

02:19for you and that will ease the burden potentially for first home buyers.

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