Coalition's pledge to relax bank lending laws for home ownership labelled a 'disaster waiting to happen' by Greens
The Coalition's election pledge to relax home lending laws for first homebuyers has been labelled a "disaster waiting to happen" by the Greens.
Shadow housing minister Michael Sukkar said the Liberal Party would push regulator APRA to lower the mortgage serviceability buffer from its COVID-19 level of three per cent.
This safety buffer is required when considering if a person will be able to make their mortgage repayments.
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The safety buffer for bank lenders is three per cent above the current interest rate. Dion Georgopoulos / Australian Financial Review
It means borrowers entering the property market are only approved for a loan if the bank is comfortable they can afford a mortgage with an interest rate three per cent above the current rate.
The serviceability buffer was raised from 2.5 to 3 per cent per cent during the period of historically low interest rates during the pandemic.
Sukkar labelled the current rate as "out of date" and vowed the Coalition would change it if elected to help young Australians buy a home.
"Nearly 40 per cent of potential first home buyers are not able to get finance for a loan, primarily because of that serviceability buffer," Sukkar told ABC radio today.
"Now that we have elevated interest rates, a serviceability buffer that has not been flexible with those changes is just blocking Australians."
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Shadow Housing Minister Michael Sukkar said the Coalition would relax lending laws if elected. Elke Meitzel
However, Greens housing spokesperson Max Chandler-Mather claimed it would only generate more profits for banks and result in crippling debt for homeowners.
"It is not a solution to the housing crisis. It's a disaster waiting to happen," Chandler-Mather said.
"The prime minister and the opposition leader were able to buy homes when they were young without taking on million-dollar mortgages, and all the Greens are saying is that this generation should be able to do the same."
The Greens instead called on both parties to scrap negative gearing and the capital gains tax discount.
A spokesperson for leading social housing provider Home in Place said changing lending laws would only make homes more unaffordable.
"It is being pitched as something that will help first home buyers, but looser lending standards would apply to all borrowers meaning investors can also borrow more," said Home and Place group executive manager for marketing and home affairs Martin Kennedy.
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"The result will simply be more credit being thrown at a market where prices are already at record highs."
Opposition Leader Peter Dutton backed the idea of relaxing lending laws so young Australians didn't need to rely on the "bank of mum and dad" to afford a home.
"I think potential arrangements are in place at the moment that are too difficult for young homebuyers," Dutton told media during a campaign stop in Melbourne today.
Peter Dutton said he was committed to helping young people buy their first home. James Brickwood
"I've made this point many times but I'm not going to be a prime minister, as Mr Albanese is, that is happy with a housing market where only those kids with a bank of mum and dad can buy a home.
"That is not my dream for our country."
Labor has also promised it will tackle home ownership if elected, however its policies are geared towards boosting social housing and supply.
The federal government also increased the income and house price caps for the Help to Buy scheme in the 2025 federal budget.
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