AUSTRALIA’S biggest banks are split on whether it should be easier to get a home loan, amid warnings changes to lending regulations could send more borrowers into financial perdition.
Prospective homeowners would have more buying power if rules restricting access to mortgages were more flexible, NAB and the peak banking body say.
The financial regulator, APRA, requires borrowers to show they can afford a 3% interest rate rise as a buffer against monetary policy shocks or a drop in earnings.
While it was an important mechanism to protect the financial system, modest changes to the buffer for first homebuyers would help boost their borrowing power, NAB executive Andy Kerr told a parliamentary inquiry examining the financial system’s impact on home ownership.
“It’s important that all options are on the table right now so we can meaningfully improve access to credit for Australians in a responsible way,” he said.
The Australian Banking Association’s chief of policy Chris Taylor said there was merit in considering allowing borrowing requirements to be assessed on a case-by-case basis, based on an individual’s capacity.
From NAB’s experience, first homebuyers were no more risky than other borrowers, Mr Kerr said.
But Commonwealth Bank, the nation’s biggest lender, and Westpac said there was no reason to change the existing restrictions.
“We don’t think the right answer is to put customers into more debt,” Westpac manager Martin Green said.
From the data his bank had available, first homebuyers were a higher risk, CBA executive Angus Sullivan said.
As a result, the levels of capital available for first homebuyers should reflect their underlying risk to protect them from taking on unmanageable debt.
The consequences of easing financial restrictions and allowing more people to go into unmanageable debt could be devastating.
Nadia Harrison, chief executive of Mortgage Stress Victoria, said irresponsible home loans could be emotionally and socially crippling, potentially leaving borrowers homeless.
“There are thousands of individuals and families behind each non-performing loan statistic, and any suggestion that we should target a higher arrears rate for homeowner borrowers would have a real human cost,” she said.
The banks and consumer advocacy groups agreed the greatest barrier to home ownership was the high cost of housing, rather than their access to credit.
Mr Sullivan said if CBA had 100 units to solve the housing affordability problem, they would put 98 of them into stimulating supply.
Meanwhile, increasing the availability of commercial “build-to-rent” developments and social housing would make rentals more affordable, the inquiry has been told.
Australia’s housing settings, with tax concessions for investors, incentivise individual landlords over large-scale institutional providers, leading to worse outcomes for renters, University of Queensland economics professor John Quiggin said.
Private landlords, commonly known as “mum and dad” investors, differ greatly in their willingness to treat tenants with appropriate respect and undertake necessary repairs, he said in a submission to the committee.
Advocates say build-to-rent offers tenants greater stability, with longer leases and typically less chance of the dwelling going up for sale or the investor deciding to live in it.
But current settings mean the sector would inevitably focus on high-end buyers, so this must be accompanied by an expansion of social housing to enable more opportunities for low-income households, Prof Quiggin argued.
Social housing and build-to-rent are much less prevalent in Australia than comparable countries
The Albanese government is trying to introduce tax incentives for the asset class to make it more competitive but has faced a roadblock in parliament, with the coalition and the Greens opposing it in the Senate.
