New Research Reveals Simple Way Thousands of Aussies Can Enter Housing Market

Hundreds of thousands more Australians, including many aged 25 to 34, could access an affordable home loan if the serviceability buffer rate was reduced from 3 per cent to 2.5 per cent, according to new research commissioned by the Finance Brokers Association of Australia (FBAA).

The research, conducted by global specialist research consultancy CoreData, found that reducing the serviceability buffer by 0.5 per cent could boost borrowing capacity by $276 billion nationally.

Around 270,000 more people could access median home loans and almost 400,000 first home buyers aged between 25 and 34 would benefit, with those using a 5 per cent deposit seeing the greatest access gains for loans under $900,000.

FBAA managing director Peter White AM said both major parties should now make a pre-election commitment to reduce the rate, acknowledging that the Coalition has already done so.

“We’ve said for a very long time that this simple move would make a massive difference to the housing market because we are talking about people who can afford to service these loans,” he said.

Mr White said that the research also confirmed that the reduced buffer may “ease loan stress among current mortgage holders….as more are freed up to refinance.”

“This will, as we have stated before, free mortgage prisoners who are locked into higher rates unable to refinance due to the serviceability rate.”

Mr White acknowledged that the research found the move could unintentionally drive-up property values, but that it was generally thought amongst economists that the commitments made by both sides of politics to boost the housing market would do this already.

“Any initiative to make housing more accessible has the potential to result in property values increasing due to supply and demand, but the bottom line is that this is a very effective way to help hundreds of thousands of people enter the market, and remain in the market.”

Mr White said a reduction in the buffer will also ease pressure on the rental market from both ends, allowing more people to buy and ensuring those with existing loans don’t end up renting again due to the current unrealistic serviceability assessment rate.

He said the FBAA had given the research to both the Government and Opposition.

“We’d also like to see the government of the day regularly review the buffer rate so it remains relevant, fit for purpose and suits the state of the economy at any given time.”