The Coalition under Peter Dutton is proposing significant reforms to the Australian Prudential Regulation Authority aimed at increasing homeownership, which they claim has suffered under the current Labor government.
Criticising Labor’s financial policies for excluding many Australians from owning homes due to rigid regulatory frameworks, the Coalition plans to adjust APRA’s operations to enhance accessibility, especially for first-home buyers.
The Coalition intends to modify APRA’s serviceability buffer, which they argue remains excessively cautious.
Initially set when rates were near zero, this buffer hasn’t been updated despite rising cash rates, now over 4%, creating a significant barrier for many potential homeowners.
Additionally, the Coalition plans to mandate that APRA adjust the capital treatment for loans backed by lenders mortgage insurance, aiming to reduce the financial burden on buyers without the “bank of mum and dad.”
Support for these changes comes from industry leaders like Peter White (pictured left) of the Finance Brokers Association of Australia (FBAA), who has criticised APRA’s current serviceability buffer rate as overly restrictive.
“This rate is preventing first-home buyers from securing a home in the middle of a housing crisis, putting more pressure onto the rental market,” White said.
Echoing this sentiment, Anja Pannek (pictured right) from the Mortgage & Finance Association of Australia (MFAA) supports a move towards a dynamic serviceability buffer that adjusts with interest rates, which would potentially unlock the market for first-home buyers and allow current homeowners to refinance more easily.
“We recognise the importance of financial stability and credit risk management,” Pannek said. “However, the reality is that in a peak rate environment, our members tell us the buffer makes it harder for existing home borrowers to move to lower rate products and presents a further obstacle for prospective first home buyers to achieve their homeownership dreams.”
White also stressed that reducing the serviceability buffer is “not about relaxing lending requirements but about common sense.”
In a detailed submission to the Senate inquiry into the financial regulatory framework and home ownership in late 2024, MFAA proposed the implementation of a dynamic serviceability buffer, which would adjust in response to fluctuating interest rates, making it easier for first-time homebuyers to enter the market and for existing homeowners to refinance.
Additionally, MFAA has suggested revising capital risk weightings on loans, particularly those involving lender's mortgage insurance, to further support first home buyers.
The Coalition argued that while maintaining financial stability is crucial, APRA’s frameworks should also support broader economic objectives like enhancing homeownership and fair access to finance.
Their proposed changes are part of a broader plan that includes increasing housing supply, funding essential infrastructure for new developments, and addressing inflation to alleviate pressure on interest rates and rents.
