Banks are instructed to exclude student loan liabilities from the maintenance check.
The Albanese government will direct financial regulators to update their lending guidance, facilitating Australians with higher education loan program (help) debt and securing mortgages.
The move is also expected to unlock more funding for the construction of the unit.
The loan changes continue to drive workers’ pre-elections against younger voters, following previous moves to cut nearly $2 billion (US$12.6 billion) from student loan debt.
Treasurer Jim Chalmers said the change would ensure fair treatment Australians are considering buying a home.
“The people who have been supported should be treated fairly when they want to buy a home, and we are working with regulators to make sure they are,” he said. .
According to the plan, Australia’s Prudential Regulation Authority (APRA) will allow banks to eliminate repayment of assistance from service responsibilities assessments if borrowers are expected to immediately repay their debts.
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Additionally, APRA will modify the debt-to-income reporting rules, acknowledging the debt is not classified as debt and its income-dependent nature.
The Australian Securities and Investment Commission (ASIC) will amend its responsible lending guidance to ensure that the obligation is appropriately considered in the lending valuation.
Banks are welcome and industry is watching credit boost
The Australian Bankers Association (ABA) supports the move, calling it a constructive step to increase access to credit.
“Our industry welcomes this move and enriches the banks when they are doing loan assessments,” said ABA CEO Anna Bligh.
“Banks support responsible lending rules to protect borrowers and enable them to repay their loans, but the possibility of some Australians having secure access to more credits. There is always a benefit to a carefully considered update of certain regulatory guidance.
Bry added that the change alone does not resolve the barriers to homeownership, but could help future buyers secure loans.
The government is also asking APRA to update its guidance on financing the construction of new units.
Some lenders require that 100% of the units be sold in advance before approving the loan. This is a rule that suppresses housing supply.
APRA makes it clear that advance sales are a factor in risk management, but it doesn’t have to be absolute and can make it easier for developers to secure funds.
“We welcome explanations from APRA regarding lending rules related to pre-sold apartments. The ABA and our members are ready to work with regulators on these updates.” says Bligh.
“Ho-Hum” policy ignores housing crisis: against
The policy sparked sharp criticism from vice opposition leader Sussan Ray. He accused Chalmers of taking it three years to realize that young Australians were struggling to buy a home.
“It’s a real struggle to be a young person with HECS debt and the costs of living crisis,” Ray told Sky News.
“On the other hand, there are policies like this. But one million migrants have come to this country without a plan to house them.”
The coalition is also strongly opposed to the government’s move to abandon student debt.
Opposition front venture Paul Fletcher and citizen leader David Littleproud said the policy is unfair, costing all 27 million people, while only 3 million Australians. He said he claims it will bring benefits.
Shadow Treasurer Angus Taylor denounced the rise in student debt for what he called workers’ “inflation in the country.”
“The best way to deal with growing HECS debt is to combat workers’ inflation and its sources by suppressing spending and strong budgetary control. Instead, workers are controlled by spending and inflation. It’s become impossible, the inflation is stubborn, sticky and homemade,” Taylor said.
