The Australian Prudential Regulation Authority’s (APRA) decision to retain a 3% mortgage serviceability buffer has sparked outrage among industry professionals.
The Finance Brokers Association of Australia (FBAA) has called for federal government intervention, accusing the regulator of harming borrowers during a cost-of-living crisis.
FBAA managing director Peter White (pictured above) argued that the buffer, initially introduced when interest rates were at historic lows, is now outdated.
“It is ridiculous when interest rates are higher,” White said, highlighting that many Australians are trapped in “mortgage prison,” unable to refinance for lower monthly payments.
“How crazy is a situation where we are forcing borrowers to pay more during a cost-of-living crisis – not because they can’t afford it, but because of a regulator who refuses to see logic?”
The FBAA leader also pointed out the serviceability buffer’s impact on first-home buyers, stating it prevents many from entering the market and increases pressure on the rental sector.
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Rachel Wastell, a finance expert from Mozo, likened the 3% buffer to an unnecessary financial burden.
“It’s like being told to set aside enough money for a big house renovation, even though your place only needs a fresh coat of paint,” she said.
For many NSW residents, the buffer equates to an additional $2,000 in hypothetical repayments on a median-priced home.
Wastell noted that recent cash rate increases, climbing from 0.1% to 4.35%, were already stretching borrowers, and further rate hikes of 3% are highly unlikely.
“By the time such rates materialize, borrowers would have significantly reduced their loan balances,” she said.
APRA chair John Lonsdale highlighted the serviceability buffer’s purpose in safeguarding financial stability.
“It’s a contingency against economy-wide risks,” he said, citing potential economic shocks like rising unemployment or global trade disruptions. Despite criticism, APRA remains firm in its stance, prioritizing resilience over borrower relief.
White has proposed a reduced serviceability buffer of 1.5% to 2%, which he believes is more aligned with current economic conditions.
“We can’t live in the past. APRA can reassess the rate on a regular basis,”White said.
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