Login
ISCOVER
Reducing deposit sizes and re-examining stamp duty should form part of the Senate’s new home lending inquiry, according to the broking associations.
The broking associations have welcomed the Senate’s move to launch an inquiry into how lending and financial regulation is impacting home ownership, telling The Adviser what areas of focus they’d like to see included in the upcoming inquiry.
Earlier this week, the chair of the Senate economics references committee said that the inquiry seeks to explore ways to reduce lending costs and improve accessibility for first home buyers, including by considering whether the current 3 per cent buffer needs to be reviewed.
Submissions for the inquiry are open until 26 September and a final report is expected by 5 December.
Speaking to The Adviser, the leaders of the Mortgage and Finance Association of Australia (MFAA) and the Finance Brokers Association of Australia (FBAA) applauded the committee’s focus on home ownership, setting out their thoughts on what they’d like to see included.
Both the MFAA and the FBAA have represented the broking industry and consulted with government bodies, including the Senate economics reference committee, over many years, with both associations saying they looked forward to engaging on this inquiry once it formally progresses.
They said that the important role that mortgage brokers play in helping borrowers access finance and purchase their first homes should be recognised by the committee, as well as policy settings.
The CEO of the MFAA, Anja Pannek, told The Adviser: “The MFAA supports policies that facilitate home ownership for Australians who choose this path. Our members play a significant role in assisting homebuyers, particularly first-home buyers, in securing home loans.
“We know from our engagement with Housing Australia [that] 80 per cent of loans under government guarantee schemes are facilitated by brokers. As such, it is important that any initiatives stemming from the Senate inquiry recognise the essential role brokers play in supporting Australians into homes.”
Examine stamp duty and reduce deposit requirements
Pannek said: “The MFAA will be making a submission to the inquiry, highlighting opportunities for improving access to credit [to] support home ownership aspirations. For example, while the buffer rate is an important mechanism to protect borrowers, we believe there is potential for lenders to have greater flexibility in specific cases, such as dollar-for-dollar refinancing.
“We also recommend that the inquiry consider the broader barriers to home ownership. Although stamp duty is a state-based tax, it significantly impacts Australians’ ability to purchase a home, and we believe its effects on home ownership levels warrant examination.
“Additionally, the inquiry might also look into enhancing financial literacy and support programs for first home buyers, which could assist in making home ownership more accessible and in particular the significant role that brokers play with their first home buyer customers.”
Meanwhile, the managing director of the FBAA, Peter White AM, said that some changes could be made by lenders now to make home ownership more accessible.
White said: “The issues we would pursue are not all regulation adjustments, although things like the buffer rate is. Many issues come down to lender risk appetite which could be adjusted now if the banks wanted to. For example, small deposits supported by LMI or the like.
“We have pushed for a reduction in the current buffer rate ever since rates have been rising. This is necessary particularly for first-home buyers and those refinancing as the buffer rate makes a loan more affordable.
“However a lower rate needs to stay and not be increased by the lender over time, creating mortgage prisoners.”
White said the FBAA would also advocate reduced deposit requirements for first home buyers, noting that the broking industry has used various models over past years that could “form the basis for initial discussions and frameworks to be considered”.
The Housing Industry Association (HIA) has also applauded the announcement of the inquiry, with HIA managing director Jocelyn Martin saying: “Over the last two decades the rate of home ownership has declined and is at worrying levels. This is particularly concerning for those under 40, with the home ownership rate of 30–34 year old’s currently less than 50 per cent and those aged 25–29 just 36 per cent.
“This reinforces that it has become increasingly difficult, if not impossible in most circumstances, for young Australians to get into home ownership. The situation places further pressures on the rental market and subsidised housing options which is not a sustainable housing model for Australia.”
The HIA recently called for a policy reset to prioritise housing supply across all forms of housing in order to put downward pressure on housing affordability and rental prices.
“We need to equally have appropriate and proportional financial and lending regulations that look to support not impede people to access finance for housing and home ownership,” Martin said.
“Housing preferences and the expectations that people have for their housing have changed in response to the scarcity of housing and rising costs, however, the ‘Australian Dream’ of owning your own home remains. We should expect our institutions to better serve the aspirations of individual Australians.
“Access to finance for a deposit is the biggest obstacle for Australians trying to buy their first home, especially those paying rent while saving for their deposit.
“Given the current housing challenges, HIA believes that when it comes to getting first-home buyers into a home, all options need to be on the table and ensuring housing policies can respond to changes in a timely way should be the basis for all Government actions that influence the housing market.
“We are looking for this Inquiry to identify those financial and regulatory impediments that are holding back young Australians and identify new measures to ensure that home ownership can remain an achievable goal for everyday Australian.”
[Related: New Senate inquiry to delve into home lending]
JOIN THE DISCUSSION