- NAB executive wants to change lending rules
A major bank has blamed existing lending rules for preventing young Australians from buying their first home during a housing crisis.
Andy Kerr, executive director of home ownership at NAB, told a Senate hearing that the rules needed to be changed as property newcomers make up less than a third of the market as house prices continue to rise. increasing.
Banks must now reject mortgage loan applications if their calculations show that a borrower could not bear interest rates that rise 12 times.
Most interest rate increases are 25 basis points or a quarter percentage point.
With financial markets expecting rate cuts in 2025, this would prevent many young Australians from getting a home loan, denying them the opportunity to own a home as prices continued to rise and leaving them forever locked out of the market.
“A lower profit margin for first-home buyers could improve their borrowing power,” Kerr told the parliamentary economy committee on Thursday.
“While we believe housing availability is a critical issue, it is important that all options are on the table right now so we can significantly improve access to credit for Australians in a responsible way.”
Liberal senator Andrew Bragg, opposition homeownership leader, said the existing serviceability cushion was “harming first home ownership”.
A major bank has blamed existing lending rules for preventing young Australians from buying their first home (pictured is a homebuyer in Sydney)
House prices in Brisbane, Perth and Adelaide have soared into double digits over the past year.
High levels of interstate migration have boosted capital housing markets, in the face of aggressive interest rate rises, because immigration-driven population growth is causing housing shortages.
From October 2021, Australian banks must model a potential borrower’s ability to cope with a three percentage point increase in variable mortgage rates.
But in 2022 and 2023, interest rates soared 4.25 percentage points as the Reserve Bank of Australia raised the cash rate 13 times to a 12-year high of 4.35 per cent.
This was the most dramatic tightening of monetary policy since the late 1980s.
The prospect of rate cuts in 2025 could prompt the Australian Prudential Regulation Authority to review rules it introduced three years ago, when the RBA cash rate was still at a record low of 0.1 per cent.
“We believe this would provide a modest increase in the borrowing capacity of first-home buyers,” Mr Kerr said.
‘We believe that any implementation of a change would require further consideration of other credit risks.
“We see an opportunity to work with regulators and the government, specifically, to seek modest changes to the cushion for first-home buyers that would provide modest increases in borrowing power.”
Lenders must also take into account potential borrowers’ other liabilities, including their Higher Education Contribution Scheme debt.
“We also welcome the opportunity to work with the government and regulators to consider how changes to the lending framework could help first home buyers, including how HECS debt is assessed,” Mr Kerr said. .
Andy Kerr, NAB’s executive director of home ownership, told a Senate hearing that the rules needed to be changed.
First-home buyers accounted for just 31.2 per cent of borrowers in August, Australian Bureau of Statistics lending data showed.
Kerr calls for income limits to be increased on the Home Guarantee Scheme, where a first-home buyer can purchase a home with a 5 per cent mortgage deposit, and taxpayers guarantee the remainder of the 20 per cent deposit they would normally It is needed for a mortgage loan. to avoid having to pay lenders’ mortgage insurance.
“In order for more people to have access to this plan, NAB supports increasing the current income limits that have remained unchanged since 2020,” it said.
Australia’s major banks expect RBA to provide relief soon; Commonwealth Bank forecasts first rate cut in December, while NAB, ANZ and Westpac predict monetary policy easing in February.