The Coalition is pledging to change lending rules if elected in the upcoming federal election.
The proposed changes would reduce the serviceability buffer, a rule that requires banks to check whether borrowers could afford a mortgage if interest rates increased by three percentage points. This buffer was introduced in 2021 to ensure responsible lending, but critics argue it now makes it unnecessarily difficult for Australians to get home loans, particularly as interest rates are expected to ease.
Currently, banks assess a borrower's ability to repay by adding three percent on top of the interest rate they are applying for. For example, if a loan rate is 6%, the bank checks whether the applicant could still afford repayments at 9%. The Coalition believes this rule is outdated and wants to lower the buffer so more Australians, especially first-home buyers, can qualify for a mortgage.
Shadow Treasurer Angus Taylor MP and Shadow Minister for Financial Services Luke Howarth MP say their plan would support home ownership by making lending criteria more realistic and reflective of the current interest rate environment.
The Coalition's proposal has been welcomed by real estate and finance industry leaders.
Speaking to Real Estate Business, The Property Council of Australia CEO Mike Zorbas said adjusting the rules would help more Australians buy homes at a time when access to housing is a major challenge.
"Regulatory frameworks need the flexibility to provide appropriate checks and equally enable the right volume of access to finance, and we welcome ideas that support this," Zorbas said.
"A sensible safety net is important and within that frame so is ensuring as many Australians as possible can own their own homes."
The president of the Real Estate Institute of Australia (REIA), Leanne Pilkington, said the current 3% buffer is outdated and should be reduced, particularly now that interest rates are stabilising.
"It is unnecessarily restrictive and limits the borrowing capacity of Australians at a time when affordability challenges persist." Pilkington said.
Pilkington also added that the move would particularly benefit first home buyers.
"A reduction in the serviceability buffer is essential, especially in assisting first home buyers who are disproportionately impacted by the current lending restrictions," Pilkington said.
The Labor government is also looking at ways to make home loans more accessible.
With housing affordability a major election issue, both major parties are proposing changes to lending rules.
Earlier this month, Treasurer Jim Chalmers urged regulators to update lending rules, making it easier for Australians with student debt to qualify for a mortgage.
Labor also announced a two-year ban on foreign investors buying established homes, aiming to reduce competition and make housing more accessible to Australian buyers.
For homebuyers, this means potentially greater borrowing power and an opportunity to enter the property market sooner than expected.
