‘I want to hear from brokers the most’ for housing inquiry: Senator Bragg

Conducted by the Senate economics references committee, the inquiry seeks to explore ways to reduce lending costs and improve accessibility for first home buyers.

It aims to assess whether the present financial regulatory framework adequately prioritises the goal of home ownership for Australians, with particular reference to:

1. APRA prudential standards and Corporations Act 2001 provisions for lending.
2. The nature and type of debt and equity arrangements being used to underpin housing development.
3. The appropriate involvement (if any) of corporate and institutional funds in the provision of housing.
4. The effectiveness of mechanisms to monitor investment in the residential property market.
5. The tax treatment of residential property and impacts on demand and house prices.
6. The adequacy of metrics available to policymakers for monitoring the ratio of new housing supply relative to population growth.
7. Examples of effective priority treatment for aspiring Australian home owners that do not compromise financial stability.
8. Any related matters.

Speaking on The Adviser’s In Focus podcast about the new inquiry, the chair of the committee, senator Andrew Bragg, said that the inquiry is actively seeking input from mortgage brokers to help shape its recommendations.

Indeed, the Liberal senator (and shadow assistant minister for home ownership) told The Adviser that he is “in the market for new ideas” to improve first home buyer activity and deregulate stringent lending laws, saying that brokers are ideally placed to give evidence to the inquiry.

Speaking on the In Focus podcast, he said: “Clearly, we want to try and help everyone, but our main focus is on ensuring that more first home buyers can come into the market. Now, in the inquiry, we are looking for the ideas that industry has.

“So, I’m hoping that the mortgage brokers and the banks and the other financial institutions can raise some of these issues on behalf of their customers.

“The mortgage brokers, I would say, would be the people I’d probably want to hear from the most – as a kind of consumer advocate – here, because they are the people that are closest to the ground in terms of understanding the challenges people face in getting financing.

“I mean, they work so closely, so diligently, with their clients. So if we don’t hear from mortgage brokers, I don’t know that it’ll be a very good inquiry.”

Both the broker associations (the Mortgage and Finance Association of Australia [MFAA] and the Finance Brokers Association of Australia [FBAA]) have already confirmed to The Adviser that they would be putting forward a submission to the inquiry (which is open to submissions until 26 September) and set out what specific topics they would like to see addressed in the inquiry, including changes to taxation, flexibility to the 3 per cent interest rate buffer when servicing refinancers, and reduced deposit requirements for first home buyers.

Bragg said he had himself used mortgage brokers for his mortgage and had “found mortgage brokers to be excellent”.

“I’m a supporter of mortgage brokers, in general. I think they give customers very good choices. And I don’t want to see a highly concentrated market, which is not going to be in the best interest of customers and the economy. So we want to see lots of choices. And I think that mortgage brokers, which obviously have been through a lot of reform in the last few years, do an excellent job,” Bragg said.

Why has the inquiry come about?

Senator Bragg said that the inquiry was necessary given the increasing difficulty for Australians to service mortgages and save enough money for a typical deposit.

The issue has particularly impacted younger, first home buyers, who may not have large enough savings volumes or incomes to qualify for a home loan while interest rates are at a 13-year peak (with little prospect of them reducing in the near term) and house prices remain elevated amid a supply shortage.

Bragg told The Adviser’s podcast that a key part of fixing the housing crisis was building more homes, but added there were “clearly things we can do on the demand side which can help first home buyers, and we want to try and tilt the scales in favour of first home buyers, prospective home buyers”.

These included:

• Considering carved-out capital arrangements for first home buyers.
• Understanding barriers to accessing finance for developers/builders.
• Looking at the cost of lending regulation.
• Looking at HECS issues.
• Reviewing things like the 3 per cent buffer.

“These are all things that I think potentially are retarding the ability of first time buyers to get that elusive first mortgage,” he said.

Why review buffers and lending regulation?

According to Bragg, some of the topics the committee would like to interrogate include whether buffers could be reduced or made more flexible and simplifying lending regulation.

On buffers, he said: “It may be the case that a 3 per cent margin was a very prudent measure during the GFC [Global Financial Crisis] or during the COVID crisis, when their rates were lower.

“Maybe, now rates are closer to a peak, it may not make as much sense to have a 3 per cent buffer, and that’s something that we wanted to explore, because – if that is the thing that is stopping some first home buyers from getting that first mortgage – then it needs to be part of the suite of policies to solve the housing crisis.”

Speaking on the need to reform lending regulation, he said that banks had to adhere to their regulatory obligations, but said that these are “extremely complex and duplicative and expensive”.

The chair of the Senate economics references committee said: “The fact that banks can’t take risk is very bad for the economy and very bad for first home buyers. Because, for a lot of people, who are perhaps older now, they will look back on their first loan they got from a bank, and they probably reflect that the bank, at the time, took a punt on them.

“These days, they [banks] can’t take a punt. So look, there is a heavy burden of regulation in Australia in relation to lending, and we will be looking at ways that we can deregulate.”

While Bragg said that there were no “silver bullets” on this housing issue, he said they “will make recommendations that we think are in the public interest”.

Submissions for the financial regulatory framework and home ownership inquiry are open until 26 September and a final report is expected by 5 December. You can make a submission here.

You can find out more about the inquiry and its process in the full interview with senator Andrew Bragg on The Adviser’s In Focus podcast here:

[Related: Industry bodies set out wish list for Senate home ownership inquiry]