Treasurer Jim Chalmers has asked financial regulators to clarify guidance as to how banks treat student debts of mortgage applicants. (AAP)
In short:
Would-be home buyers with HECS-HELP loans could find it easier to get a mortgage, with the government directing financial regulators to relax rules on the treatment of the debts.
APRA will also update lending rules for housing developers to clarify that a block of units does not need to be fully sold off the plan to qualify for a loan.
What's next?
The Coalition is mulling its own move on lending requirements, with a proposal soon to come before shadow cabinet.
Banks will be allowed to overlook HECS-HELP and other student loans in debt calculations for home loans, under a federal government push that could boost the borrowing power of some first home buyers.
Updated guidance from financial regulators APRA and ASIC, made at the request of Treasurer Jim Chalmers, will also tell banks they can disregard HELP repayments when assessing an applicant's ability to service their mortgage if they are due to pay off the debt in "the near term".
Mr Chalmers said the clarifications were "common sense" and would "help more Australians into a home".
Can we rely on politicians to solve the housing crisis?
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"We're tackling this housing challenge from every possible angle. People with a HELP debt should be treated fairly when they want to buy a house and we're working with the regulators to make sure they are."
APRA will also update lending rules for housing developers to clarify that a block of units does not need to be fully sold off the plan to qualify for a loan, something that had previously been ambiguous.
"By unlocking more finance from the banks we'll see more housing projects get off the ground more quickly," the treasurer said.
It is the third HELP-related policy Labor has offered up in the last year as it searches for cost-of-living supports with minimal impact on the underlying budget balance.
Last year, it undid the unusually high indexation of HELP debts that had applied in the last two financial years, and it has promised to reduce all outstanding debts by 20 per cent if re-elected.
Coalition undecided on looser lending requirements
The move also gets ahead of a possible Coalition move to relax lending rules for first homebuyers, a push championed by the opposition's Assistant Housing spokesperson Andrew Bragg.
Senator Bragg chaired a Senate inquiry which recommended rolling back "responsible lending" rules enacted in the wake of the Global Financial Crisis.
His proposal would lower the serviceability buffer, a three percentage point "stress test" lenders must apply when assessing mortgage applications.
The Coalition has yet to adopt that or any other of Senator Bragg's recommendations as policy, but sources with knowledge of their deliberations told the ABC a proposal was ready to go to the shadow cabinet.
Coalition to push for first homebuyers to get easier access to home loans
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The government has indicated it does not plan to make any changes to responsible lending protection, and Labor senators on the committee were opposed to Senator Bragg's suggestions.
Labor Senator Jess Walsh said any broader lowering of lending requirements would "result in higher house prices… expose first homebuyers to greater risk they cannot afford, and add systematic risk to the financial system, all without building a single home."
The Australian Banking Association also told the inquiry it was broadly comfortable with the status quo, but it has pointed to current APRA and ASIC guidance as a cause of some reluctance among banks to lend to first homebuyers.
Treasurer Jim Chalmers raised the matter with APRA Chair John Lonsdale last November and ASIC Chair Joe Longo in February.
APRA regulates banks, which account for 92 per cent of home loans, while ASIC regulates non-banking financial institutions, which account for 5 per cent.