Mortgage Rules Holding Back the Australian Dream

The second and final Senate hearing into lending laws further exposed the blunt rigidity of the mortgage rules set by bureaucrats.

Even the prudential regulator has described these interventions as “broad”.

The committee heard three main pieces of evidence:

1. The blunt 3% serviceability buffer is damaging first home ownership;
2. There is no structural focus on home ownership; and
3. Different risk weightings would change pricing and access.

First home buyers are missing out on loans and are facing reduced borrowing capacity.

The serviceability buffer has been unresponsive to market events and monetary policy. As we reach the likely top of the tightening cycle, the hypothetical 3% buffer no longer reflects the reality of mortgage serviceability.

Labor does not want a more flexible system to help first home buyers enter the market.

The Australian Banking Association has called for a “higher degree of flexibility” so that banks can issue loans to prospective borrowers.

The National Australia Bank says a change to the buffer would provide “first home buyers with additional borrowing power”.

The Committee also heard evidence that first home buyers could benefit from cheaper mortgages if there was a lower capital risk weighting.

The Australian Prudential Regulation Authority admitted they cannot take first home ownership into consideration when setting lending standards. It is not in the mandate nor is it in the statement of expectations the Treasurer, Jim Chalmers, has provided APRA.

Labor has presided over a housing nightmare. It has done nothing creative to help first home buyers.

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