Brett Warren , National Director – Metropole Group
Imagine this: You’re ready to step into the housing market, but the door feels firmly shut because strict home loan rules are holding you back. Now, picture that door opening just a crack, giving you – and tens of thousands of others – a shot at getting a mortgage. Sounds promising, right?
That’s the vision the Coalition has put forward, with plans to lower the serviceability buffer for home loans if they win the Federal Election in early May.
Right now, banks add a three-percentage point buffer to interest rates when assessing borrowing capacity. The idea is to ensure borrowers can still manage their repayments if rates were to rise. But with the Reserve Bank’s cash rate sitting at 4.1 per cent, the Coalition argues that this rule is too harsh, particularly for first home buyers.
Opposition housing spokesman Michael Sukkar suggests lowering the buffer to 2.5 per cent – the level it was at pre-2021 – making it easier for people to qualify for a loan. In fact, he says, this simple tweak could open the housing market to tens of thousands of aspiring homeowners.
Banks, however, seem divided. Some, like NAB and ANZ, are in favour of less stringent rules. But others, such as Commonwealth Bank and Westpac, think current lending standards are necessary, particularly in an uncertain economic climate. So, what does this mean for you, if you’re dreaming of owning your first home? If the Coalition’s plan goes ahead – and they win the Federal Election – you might find that dream a little closer within reach.
Also, this week, the Reserve Bank decided that while the cash rate was “restrictive” it didn’t believe it was necessary to reduce it – yet. This will no doubt be disappointing for the Federal Government given the next RBA meeting is not until after the Federal Election. Time will tell who is in the top job by then.
