What did they say
The Coalition has promised to relax home lending rules, saying that it will help more young people buy their own home.
It has promised to direct the banking regulator to lower the serviceability buffer from the current 3 per cent.
Shadow Housing Minister Michael Sukkar made the announcement this week, stating that the current serviceability buffer is overly cautious.
He said that a new home loan serviceability buffer should be set at 2.5 per cent because too many home buyers were failing to meet the 3 per cent requirement.
He also said the Coalition would also require the Australian Prudential Regulation Authority (APRA) to change how they treat lenders mortgage insurance.
"Right now, Australians without access to the 'Bank of Mum and Dad' are punished by higher borrowing costs-even when the actual risk is the same or lower," Mr Sukkar said in a statement.
What is a serviceability buffer?
When you apply for a home loan the bank needs to insure that you can pay the loan and also adds a buffer.
This "buffer" is included to ensure that the borrower can absorb rate rises and therefore are not at risk of defaulting on their loan.
So for example, with a buffer of 3 per cent, borrowers applying for a home loan with an interest rate of 6 per cent must be assessed to see whether they'll still be able to make repayments if their interest rate was to rise to 9 per cent.
For a bit of background, APRA initially brought in a 2 per cent home loan serviceability buffer in 2014.
It increased the serviceability buffer from 2.5 per cent to 3 per cent in 2021 and reviews and adjusts the rates according to current economic conditions.
However Mr Sukkar said on Tuesday that while that 3 per cent serviceability buffer was appropriate when the RBA's official interest rate was at a record low of 0.1 per cent, it was not with the current cash rate of 4.1 per cent.
What is lenders mortgage insurance?
The other area up for disruption is lenders mortgage insurance.
Lenders mortgage insurance is taken out by a lender when they are are applying for a loan with less than a 20 per cent deposit.
The Coalition would seek to no longer require banks to hold more capital against lenders mortgage insurance backed loans that effectively leads banks to charging higher interest rats on them.
