TRANSCRIPT
Home ownership has long been seen as an Australian dream, but for young people like these students, it can feel more like a nightmare.
Speaker One: "At its current stage I feel like it will be fairly hard to get a home."
Speaker Two: "I feel like impossible."
They're in their first weeks of university, joining a cohort of people who are likely to graduate with significant debts.
Under current arrangements, that can make it harder to get a home loan.
Treasurer Jim Chalmers has announced changes he says will help.
“We're coming at this housing challenge from every responsible angle. We've asked the regulators and the banks to apply a more reasonable lens to loan applications from people with a student debt.”
When banks assess a home loan application, they consider an applicant's level of student debt, and weigh this against them.
But Mr Chalmers says student debt is not the same as other debts, with one reason being it does not include interest beyond indexation.
“It's different because paying it back is contingent on income. If people are between jobs, the repayment of student debt is paused. There are a whole range of reasons why this is a different kind of debt. This was pointed out by in the recommendations of the Universities Accord. Now for the last few months I've been working closely with the regulators. “
Those regulators include the Australian Prudential Regulation Authority, APRA, and the Australian Securities and Investments Commission, ASIC.
They set lending regulations and guidance that influence how banks assess serviceability - in other words, someone's ability to pay back a loan.
The Treasurer is instructing APRA to tell banks to exclude student debt repayments from mortgage assessments, provided the potential buyer is set to pay off the debt in the short term.
It's understood APRA will also update the debt-to-income reporting definition so HELP debts are no longer treated as debt for reporting purposes, boosting applicants' borrowing power.
UNSW economics professor Richard Holden agrees the existing guidelines have made things more difficult for those with student debt.
“It did seem to be a barrier. So it appeared that banks were counting this as any other kind of debt, and that they were just lacking the kind of guidance that they would need from APRA to be sure that they were treating it the right way. So that's just the banks being cautious. But if this leads to a clarification of that, that will be very beneficial for young people getting into the property market.”
Coalition Housing Spokesman Michael Sukkar disagrees.
“This is an eleventh hour letter from the treasurer to APRA making some very minor changes. We don't think it's going to materially help Australian first home buyers. It's just an action to cover up on the fact that this government has made life harder for potential first home buyers and renters. Over the last two and a half years.”
The changes announced today come in addition to two previous policies from the Federal Government.
Last year, it undid the unusually high indexation of student debts that had arisen in recent years.
Labor has also promised to wipe 20 per cent off student debts if re-elected.
Meanwhile the Greens’ spokeswoman, Senator Penny Allman-Payne says Labor's changes don't go far enough.
“A much better option than ignoring a HECS debt would be to wipe the HECS debts altogether. We know that HECS debts have blown out of control for young people in this country, and they are a real weight around the neck of young people who are trying to move forward with their future.”
As politicians move into campaign mode ahead of the looming election, they'll be hoping their policies can help more people into houses, and get them back to Canberra.
“All done. Sold your way congratulations, well bought.”
