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The industry association has suggested government change financial regulation, simplify home ownership schemes, innovate the mortgage market innovation and improve financial literacy to better support home buyers.
The Mortgage & Finance Association of Australia (MFAA) has submitted eight recommendations across four main areas to the Senate inquiry into the financial regulatory framework and home ownership.
In its submission, developed with feedback from broker and aggregator members, the industry association highlighted the important role brokers play in providing choice and competition in the home loan market, for the benefit of borrowers and set out a range of changes that could help improve the prospects of aspiring home buyers entering the market.
Financial regulation
- Recommendation 1: Review the constraints under the Credit Act to offering non-traditional forms of credit (for example, equity share type of arrangements that see a customer pay a fee on termination).
- Recommendation 2: Review APRA standards - including introducing a “dynamic” serviceability buffer that adjusts with interest rates and recognising a greater rage of products in capital risk weightings.
Government-backed home ownership schemes
- Recommendation 3: Simplify government-backed homebuyer schemes across all levels of government and considering schemes that are more permanent, and partnering with the mortgage broking industry to raise awareness of schemes.
Competition and innovation in the mortgage market
- Recommendation 4: Support development of housing affordability products through a regulatory sandbox that would allow lenders to test new affordability-focused solutions under regulatory oversight
- Recommendation 5: Continue to support the development of the Consumer Data Right (CDR), broaden data coverage, improve integration and progress broker use cases.
- Recommendation 6: Institute a faster, smoother discharge process (as per the ACCC Home Loan Price Inquiry) andallow mortgage brokers to act for a customer in the discharge process if the consumer provides consent.
- Recommendation 7: Adjusting or waiving HECS debt for first home buyers so that, in certain circumstances, HECS debt is removed from serviceability assessments.
Financial literacy
- Recommendation 8: Recognise the role of brokers in supporting home ownership and promote all first home buyers to see a mortgage broker.
‘Increasingly prohibitive for aspiring homeowners to enter the market': MFAA CEO
Commenting on the recommendations, MFAA CEO Anja Pannek highlighted the opportunities to evolve and adapt the application of regulation to encourage home ownership without causing detriment to the lending market and consumer protections.
She said: “The APRA serviceability buffer, for example, is critical in managing systemic risk but does not always accommodate the individual circumstances of borrowers. Indeed, our members have cited the rigid application of serviceability buffers under APRA's standards as the number one barrier to refinancing for many borrowers, especially in the context of rising interest rates.
“We propose a dynamic buffer that adjusts with interest rates – shifting up when interest rates decrease or down when interest rates increase – is more appropriate and will allow more Australians to become homeowners.”
She also highlighted not only the importance of mortgage brokers in increasing awareness of government-backed homebuyer schemes, but also that refining these schemes to make them more accessible will contribute to greater access to finance for first homebuyers.
“It is important to ensure an appropriate level of mortgage industry engagement as schemes are refined or new ones developed to ensure these can be accessed by potential first home buyers who use the services of a mortgage broker, given this is where most first-time buyers and first home buyers seek guidance from,” the MFAA CEO said.
“By encouraging first home buyers to see a mortgage broker in all instances will ensure more Australians are equipped with the knowledge and confidence needed to understand their options to enter the housing market and achieve financial security,” Pannek suggested.
The MFAA CEO recently met with Senator Bragg to discuss the submission and how brokers are providing support to the majority of the home loan market.
Speaking to The Adviser about the recent meeting with Senator Bragg, Pannek stated: “The Senate Inquiry on the financial regulatory framework and home ownership was the focus for our meeting with Senator Bragg [and] we also took the opportunity to highlight the essential role our members play in the Australian economy and helping Australians achieve their home ownership goals.
"Senator Bragg shared with us the great experience he had using a mortgage broker,” she continued.
"This is a common sentiment when we meet with stakeholders and government, hearing stories about people – decision makers – using a mortgage and finance broker themselves when purchasing or refinancing their own homes."
Reflecting on the submission, she added that home ownership remains an important goal for many Australians given its ability to provide financial security and build wealth, but suggested that the path to home ownership has become increasingly challenging.
“The rising cost of housing has been pushing homeownership further out of reach for many Australians for a number of years.
“In today’s high inflation environment, with elevated interest rates placing even further pressure on borrowers, it is increasingly prohibitive for aspiring homeowners to enter the market,” she said.
“Our submission considers the appropriateness of current legislative and regulatory frameworks in inhibiting or enhancing greater pathways for home ownership and encouraging competition in the home lending sector for the benefit of borrowers,” Ms Pannek elaborated.
“The debate between the right to affordable and appropriate shelter versus the right to buy a home highlights a broader policy challenge: balancing the need for universal access to housing with the socio-economic aspiration of home ownership.”
The Senate inquiry is now reviewing submissions and a final report is expected by 5 December.
You can find out more about the inquiry and its process in The Adviser’s recent interview with Senator Andrew Bragg on The Adviser’s In Focus podcast here:
[Related: ‘I want to hear from brokers the most’ for housing inquiry: Senator Bragg]
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