The Federal Government has asked banks to disregard HECS and other student loan debts when considering a person’s application for a mortgage.
For those with a student loan, this means they will be able to borrow more for a home loan.
The Opposition has cast doubt over whether it will improve young people’s chances to enter home ownership.
Borrowing
Banks assess prospective borrowers based on their financial income and history, which includes debts.
Borrowing rules are set by the financial services industry regulator, the Australian Prudential Regulation Authority (APRA).
Its current rules state HECS debts should be treated the same as other debts, such as credit cards.
As a result, a student loan could reduce someone’s maximum borrowing capacity. However, the recent announcement will change this.
Announcement
Treasurer Jim Chalmers announced that he has asked banks and financial regulators to relax rules around HECS debt considerations for mortgages.
“These are commonsense changes that will help more Australians into a home,” he said.
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“By unlocking more finance from the banks we’ll see more housing projects get off the ground more quickly.“
The financial regulator, APRA, will update its advice on borrowing to reflect Chalmers’ request.
Banks' response
While the rules apply to all lenders, all of Australia's big four banks – Commonwealth, ANZ, Westpac and NAB – have actively supported the move.
A Commonwealth Bank spokesperson said it will “support first home buyers enter the market”. ANZ CEO Shayne Elliott said the new rules would help “more people get into a home.“
Last year, NAB made a submission to a Senate inquiry urging a review of how HECS is treated as a borrowing liability.
Westpac CEO Anthony Miller said it'll address "long-term and chronic structural obstacles" that have hampered early-university graduates from entering the housing market.
Opposition
In a joint statement, senior Coalition Shadow Ministers Michael Sukkar (Housing), Angus Taylor (Treasurer), and Andrew Bragg (Home Ownership) described the Government’s plan as “underwhelming”.
“This announcement provides no new money, no new ideas and no new homes,” the statement read.
If elected, the Coalition has vowed to allow first home buyers to access $50,000 of their superannuation to put towards a mortgage.
