Financial author Scott Pape, known as the Barefoot Investor, has criticised a new housing policy proposal from the Coalition, warning it could worsen Australia’s housing affordability crisis.
The policy, introduced by shadow housing minister Michael Sukkar, aims to ease lending requirements by lowering the mortgage serviceability buffer. Currently set by the Australian Prudential Regulation Authority (APRA), the buffer requires lenders to assess whether a borrower could repay their loan if interest rates rise by three percentage points above the actual rate. This was increased from 2.5% during the COVID-19 pandemic as a safeguard.
Sukkar’s proposal suggests reducing this buffer to allow more Australians—particularly those without financial support from family—to access the property market.
Pape dismissed the plan as potentially harmful, saying it could push property prices even higher by enabling all buyers to borrow more, according to a report by the Daily Mail. Writing in his NewsCorp column, he said, “When you apply for a home loan, the bank checks if you can afford [it] even if interest rates go up. It’s called a ‘stress test’—and it’s there to stop people getting in over their heads.”
Pape maintained that maintaining the current buffer is “a thoroughly sensible policy that keeps the screws on bankers.”
He responded to a reader named Penny, a 32-year-old teacher in Melbourne, who had expressed concern about the policy. She wrote in asking whether the proposed changes would benefit first-home buyers like her and her partner, both teachers, who are struggling to afford a home without financial assistance from family.
Pape said that while reducing the buffer could technically allow borrowers to qualify for larger loans, it would likely result in greater competition and ultimately higher house prices.
“Let’s think about it for, say, six seconds: Lowering the buffer would mean everyone could borrow more—so they would—and all that would do is drive up housing prices even further,” he wrote.
He compared the policy to a dubious dim sim from a petrol station, warning first home buyers not to be misled by what he characterised as a short-term political fix.
As part of its election promise, the Coalition said that the current lending rules unfairly penalise Australians without intergenerational wealth.
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