Australia’s largest banks are divided on whether it should be easier to obtain a home loan, with NAB and the peak banking body advocating for more flexibility in mortgage access rules. Currently, the financial regulator, APRA, requires borrowers to demonstrate they can afford a 3 per cent interest rate increase as a buffer against economic shocks. NAB believes that modest changes to this buffer could increase borrowing power for first homebuyers without significantly increasing risk.
NAB executive Andy Kerr emphasized the importance of exploring all options to improve credit access for Australians responsibly. However, Commonwealth Bank and Westpac disagreed, stating that there is no need to change the existing restrictions. Westpac’s manager, Martin Green, expressed concerns about putting customers into more debt, while CBA executive Angus Sullivan highlighted first homebuyers as a higher risk group. He suggested that capital levels for first homebuyers should reflect their risk to prevent them from taking on unmanageable debt.
The potential consequences of easing financial restrictions and allowing individuals to take on unmanageable debt were a significant concern raised. However, the inquiry also discussed alternative solutions to improving affordability, such as increasing the availability of commercial “build-to-rent” developments and social housing. Build-to-rent offers tenants greater stability with longer leases and less likelihood of the property going up for sale or the investor deciding to occupy it.
Australia’s social housing and build-to-rent sectors are less prevalent than in comparable countries like the UK. The current government has proposed tax incentives for the build-to-rent asset class to boost competitiveness, but it has faced opposition in parliament from the Coalition and Greens. Advocates believe that expanding build-to-rent and social housing options could make rentals more affordable and provide a viable solution to the country’s housing affordability challenges.
Overall, the debate around easing mortgage access regulations in Australia’s banking sector reflects broader concerns about balancing credit availability with financial stability. While NAB and industry advocates argue for greater flexibility to help first homebuyers, concerns have been raised by other major banks about the potential risks of increased debt. The inquiry also highlighted the importance of alternative solutions, such as supporting build-to-rent and social housing developments, to address affordability issues and provide more stable housing options for Australians.
