Coalition fights to win over first-home buyers with huge housing promise

Industry organisations have praised the Coalition's pledge to lower the financial regulator's serviceability buffer if it wins the May 3 election, saying the move will significantly improve housing affordability for young Australians.

The Peter-Dutton-led Coalition promises it will demand APRA relax rules for approving home loans in the hope of allowing more first-home buyers to enter the market.

APRA requires banks to add a safety buffer when considering whether someone applying for a home loan will be able to make their loan repayments.

This serviceability buffer was raised to 3% above the loan interest rate in 2021, when the official cash rate was at an all-time low of 0.1%. Despite the Reserve Bank of Australia lifting the cash rate 12 times since May 2022, the buffer has remained unchanged, squeezing the borrowing capacity of thousands of first homebuyers.

With the cash rate now at 4.10%, the Coalition claims this buffer is too restrictive for those trying to buy their first property.

"We want younger Australians, millennials, Gen Zs in particular, to break the trajectory they're on now, where they're likely never to own a house," shadow assistant minister for home ownership Andrew Bragg told Sky News this week.

"Someone who's borrowing half a million dollars will be able to borrow an extra $40,000 and have a loan which is cheaper to the tune of about $1,000 a year under these changes."

'Home loan myths': youtube.com/mortgagechoice

The increase in borrowing capacity means buyers are less likely to need Lenders' Mortgage Insurance but if they do, the loan will be smaller and incur less interest.

Mr Bragg said reducing the buffer was not risky for lenders, because "all the other arrangements still apply in terms of determining whether a person can pay back the loan".

"What it means is that a first home buyer gets preferenced compared to another investor when they're trying to buy that elusive first house," he added.

The Property Council of Australia chief executive (CEO) Mike Zorbas praised the proposal, adding it was important that mortgage settings back the goal of homeownership, particularly among first-home buyers.

"We welcome a framework that achieves both appropriate safeguards and access to homeownership in equal measure. Sadly, it has never been harder for first-home buyers in this country," Mr Zorbas said in a statement.

'Five of the hottest affordable suburbs for 2025': youtube.com/mortgagechoice

"APRA should factor in first-time buyers when shaping regulations with an eye to boosting homeownership, maintaining balance and flexibility to adapt to changing conditions."

Mr Zorbas added that supply remained the key consideration when it came to housing affordability.

"To address this, we must streamline regulations, grow our construction workforce and remove investment-repelling taxes to support more home delivery across the country," he added.

Real Estate Institute of Australia president Leanne Pilkington said the Coalition's commitment aligned with the institute’s advocacy efforts.

“With the recent rate cut and the expectation of more in 2025, the 3% buffer is … unnecessarily restrictive and limits the borrowing capacity of Australians at a time when affordability challenges persist," she said.

First home buyers are getting plenty of attention from both sides in the pre-election campaigning. Picture: Getty

The Housing Industry Association managing director Jocelyn Martin described the Coalition's proposal as "a strong and timely response to one of the most significant barriers to home ownership".

"The current settings — particularly the 3% serviceability buffer — are unnecessarily restrictive and are [cutting] people out of home loans they could otherwise adequately service."

Urban Taskforce Australia, a non-profit representing Australia's most prominent property developers and equity financiers, has previously called for the buffer to be reduced. It said the move would "make a real difference" when it came to housing supply and affordability.

"Today’s announcement by the Dutton-led coalition shows an opposition that is prepared to use all the levers of government to ease housing cost pressures for first-home buyers," said CEO Tom Forrest.

"It’s time that APRA got real and relaxed this impost."

Housing affordability has become a red-hot election issue, with both prime minister Anthony Albanese and Mr Dutton promising to help young people get their foot on the housing ladder.

Mr Dutton has voiced several initiatives, including allowing first home buyers to access up to $50,000 of their super for a home deposit; cutting the permanent migration program by 25%; implementing stricter caps on foreign students; and spending $5 billion on essential infrastructure.

Labor's housing fund, meanwhile, aims to build 20,000 new social housing properties over five years from 2024, though the legislation has been dogged by delays.

The government also says it will also build 20,000 new affordable homes through its National Housing Accord.

In its federal budget last week, Labor allocated $33 billion to address housing affordability, which includes increasing the income and house price caps for the Help to Buy scheme, a shared equity program for first home buyers in which the government contributes up to 40% of the property purchase price.