As the reserve bank meets to consider whether to cut interest rates, housing affordability remains at the centre of the political debate. A federal inquiry is considering whether there’s a need to ease restrictions on banks about how much they can lend out to first home buyers. But changing the goalposts about how much debt people can take on could also increase financial risk.
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00:00One of the things that they're looking to help first home buyers with is how much access
00:07to finance they can get.
00:09Currently, first home buyers can't borrow as much money because of what's known as a
00:14serviceability buffer.
00:16So it's there to restrict people getting into too much debt.
00:19So if you went to the bank today, for example, and you said, give me a variable rate and
00:23they said, okay, I'm offering you a 6% variable rate, the banks don't actually assess you
00:29at 6%.
00:30They assess you at 3% above 6%, so at 9%.
00:35So what they're saying is that 3% buffer, they should drop that a bit lower.
00:39And that would basically make it easier for first home buyers to get the finance they
00:43need to break into the property market.
00:46Well, the Australian dream is falling out of reach for millennials and for Gen Zs.
00:52One of the reasons is that the lending laws are very rigid and blunt.
00:58And they give no quarter to first home buyers or prospective first home buyers.
01:04And so there are a range of things that we are looking at through the Senate inquiry.
01:09So a lot of the people that are presenting this to this federal inquiry have over the
01:13past few weeks talked about the risks, being that it does allow people to take on more
01:19debt that they could eventually handle.
01:21And the issue is, you know, if interest rates were suddenly to rise, or a number of people
01:26lost their jobs, is then their ability to repay that debt becomes far harder.
01:31I spoke to a number of consumer groups who've all been talking about mortgage stress being
01:36a real issue right now in current circumstances, where the economy is still relatively strong
01:42while there is a cost of living crisis.
01:44We haven't seen mass numbers of unemployment.
01:48The unemployment rate is still holding steady.
01:50So the issue they're concerned about is if economic circumstances do change, and you
01:56do drop the buffer, that's allowed a lot of people to take on too much debt.
02:01So the inquiry has held a number of hearings over the past couple of weeks.
02:05And it could be in the coming weeks that it hands down its final recommendations.
02:10We heard earlier from Liberal Senator Andrew Bragg, the Liberal Party is really considering
02:16this as serious policy to take to the next election.