Call for Govt Intervention – Regulator Has Let Down Home Loan Borrowers

The decision by the Australian Prudential and Regulation Authority (APRA) to leave the mortgage serviceability buffer at 3 per cent has been labelled nonsensical by the peak body representing Australia’s finance and mortgage brokers, who has accused the regulator of not acting in the best interest of Australians.

The Finance Brokers Association of Australia (FBAA) has called on the federal government to intervene and force the regulator to reduce the buffer rate, which is preventing thousands of Australians from purchasing a home and forcing thousands more to remain in ‘mortgage prison’ unable to refinance.

FBAA managing director Peter White AM said while a 3 per cent buffer was appropriate in the past because interest rates were at an all-time low and were always going to rise significantly, “it is ridiculous when interest rates are higher.”

“We have a scenario being played out across Australia where people who have been paying their mortgage without default are being prevented from refinancing to a loan with a lower monthly payment.

“How crazy is a situation where we are forcing borrowers to pay more during a cost of living crisis; not because they can’t afford it, but because of a regulator who refuses to see logic?” he asked.

Mr White also pointed out that the high buffer rate was preventing first home buyers from securing a home in the middle of a housing crisis, putting more pressure onto the rental market.

“To secure a mortgage many potential borrowers must prove they can service a loan more than $1500 above what their repayments will actually be.”

While acknowledging that a buffer rate protects both the banks and the borrowers, he said interest rates are going down in most western nations.

“We can’t live in the past and a buffer of 1.5 to 2 per cent is far more appropriate today and in the near future.

“APRA can reassess the rate on a regular basis so I’m not suggesting it can’t be raised in the future.”

Mr White said its time for the government to force the regulator’s hand to stop them hurting borrowers further.