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Several brokerages have answered senator Andrew Bragg’s call for recommendations to improve home ownership and financial regulation.
Following on from Senator Bragg’s call asking for brokers to respond to the Senate inquiry into the financial regulatory framework and home ownership, several brokers have submitted responses and recommendations to the Senate inquiry for consideration.
Among the submissions released so far include one from Rhodes-based brokerage Home Loan Experts, whose CEO Alan Hemmings outlined a series of recommendations based on debt arrangements, monitoring mechanisms, and the tax treatment of residential property.
Debt arrangements
Recommendation 1: Improve collaboration among government, regulators, and financial institutions to facilitate the adoption of interest-only and longer-term loans.
Recommendation 2: Introduce 50-year interest-only loan terms to improve affordability, enabling more Australians to access home ownership and create the potential for the property to be refinanced or transferred to the next generation.
Recommendation 3: Extend interest-only periods in existing loan structures to provide flexibility and affordability, especially if property values increase over time.
Monitoring mechanisms
Recommendation 4: Enhance monitoring and data-driven policies to better understand the full impact of investment trends on housing affordability.
Recommendation 5: Integrate policies to balance financial stability with housing affordability, including incentives for affordable housing developments, improved access to land for new developments, and local government coordination.
Tax treatment of residential property
Recommendation 6: Review negative gearing and capital gains tax (CGT) and consider reducing these incentives for existing properties while keeping at current levels for new builds.
Hemmings said: “This serves two purposes: incentivises people who want to buy property to build wealth – we shouldn’t ignore this, as it supports far-reaching outcomes such as creating more self-funded retirees – and also incentivises investors to build new homes.”
Recommendation 7: Provide targeted assistance for first-time buyers such as grants, subsidies, financial education, affordable housing projects, and streamlined zoning and development approvals.
On the tax treatment of residential property, Hemmings acknowledged how current tax policies such as negative gearing and CGT attract investment and stablise the market.
“Unfortunately, they also contribute to rising property prices, making home ownership increasingly unattainable for first-time buyers,” he said.
“By reforming these tax treatments and implementing targeted assistance for home buyers, the government can strike a better balance between supporting investment and improving housing affordability for Australians.”
NSW focus
In another submission to the Senate inquiry, Michael Chadwick, general manager home finance at Loan Market Elevate, provided a series of recommendations to address housing affordability issues in the Sydney metro market and greater NSW.
Chadwick said housing affordability is “at its worst today than it has ever been” due to myriad factors including high prices, high levels of immigration, lack of infrastructure, lack of supply, restrictive home lending policies, and unattainable benefits.
Home lending policies
Recommendation 1: Review current lenders assessment rate from 3 per cent to 2.5 or 2 per cent to all applications buying a ‘new’ property to live in i.e. a brand-new home purchased from a developer or a builder.
Recommendation 2: Increase allowable ‘debt-to-income’ (DTI) ratios for applicants to borrow to purchase an investment property.
Recommendation 3: Class declared living expenses and additional mandatory expenses as normal expenses rather than additional expenses, noting the ability of customers to cancel expenses such as private health insurance without impacting their circumstances.
Incentives and schemes
Recommendation 4: Increase Revenue NSW’s First Home Buyers Assistance Scheme (FHBAS) for new homes to reflect the current average home price in Sydney (above $1 million).
Recommendation 5: Increase pricing caps for Housing Australia’s First & Family Home Guarantee Schemes and increase income caps for singles and couples.
In the submission, Chadwick also suggested a mechanism that allowed borrowers to apply for an early release of superannuation for first home buyers or people re-entering the market.
“This approach is considering many different factors of improving home loan affordability shared across many facets that would support improved borrowing power – increasing the home borrowing capacity, increasing the government incentives and releasing small amount of superannuation to help home purchasers be able get ahead of the challenges to save money while we are in a high cost environment,” Chadwick said.
“It is clear that the more we can get young families into homes only builds stronger communities and keeps families together longer.”
What’s next?
These recommendations come after industry body the Mortgage & Finance Association of Australia (MFAA) released its submission to the Senate inquiry, including suggestions to change financial regulation, simplify home ownership, and innovate the mortgage market.
The final report for the Senate inquiry is due by 5 December.
Senator Bragg, chair of the Senate economics references committee and shadow assistant minister for home ownership, spoke about his eagerness to hear from mortgage brokers during the inquiry in an interview on The Adviser’s In Focus podcast.
“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,” he said.
Find out more about the inquiry and how it could shape the housing industry in The Adviser’s recent interview with Senator Bragg on The Adviser’s In Focus podcast here.
[Related: MFAA sets out 8 recommendations to Senate home ownership inquiry]
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