Relaxing home lending rules could make up to 75 extra Greater Brisbane suburbs affordable for househunters previously priced out of the market.
Exclusive analysis by real estate services group Oliver Hume reveals changing the test for a person’s borrowing capacity by lowering the mortgage serviceability rate by half a per cent would make an extra 14 suburbs affordable for buying a house.
The number jumps to 26 if the buffer was relaxed to a rate of 2 per cent, and a 75 at 1 per cent.
This four-bedroom property at 7 Janus Court, Eatons Hill, is on the market for offers over $1.2m.
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If the serviceability buffer was lowered to 2.5 per cent, homehunters in Eatons Hill and Pine Mountain could borrow an extra $35,000 towards buying a house, the research found.
Prospective buyers could borrow about $27,000 more to buy a house in Greenbank, Mango Hill, Narangba, and Jimboomba.
The Coalition is promising to relax rules for approving home loans if it wins the federal election, claiming nearly 40 per cent of first homebuyers are not able to get a loan due to the restrictive serviceability buffer.
This four-bedroom property at 16 Burkitt St, Mango Hill, is on the market for offers over $1.25m.
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The Australian Prudential Regulation Authority (APRA) imposes the safety buffer on banks to add when considering whether someone applying for a home loan will be able to make their repayments.
The serviceability buffer currently sits at a rate of 3 per cent above the lending rate after being raised during the Covid pandemic in 2021 when interest rates were at a record low of 0.1 per cent.
Under the current rate, the Oliver Hume data reveals borrowers can only afford to buy a median priced home in 15 per cent of house and unit markets across Greater Brisbane.
This four-bedroom property at 314 Riverside Dr, Pine Mountain, is on the market for offers over $1.35m.
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That would increase to 20 per cent if the rate was cut from 3 per cent to 2 per cent.
Oliver Hume chief economist Matt Bell said he believed lowering the serviceability buffer was “good housing policy”.
“We’ve got a housing affordability problem that is 20 years in the making,” Mr Bell said.
“The real solution is the supply of more housing, but it’s hard to do and it takes time, so while this isn’t going to be a massive needle mover, that’s not a good reason not to do it. We should be pulling every lever we can.”
Mr Bell said the current rate of 3 per cent was penalising low to middle income households, with first homebuyers particularly impacted.
Oliver Hume chief economist Matt Bell. Image supplied.
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“They’re literally saving to the point of when they hit that point that they’ve saved enough for a deposit, they go back to their lender and say; ‘we want to buy’,” he said.
“(Changes) will address an inequality that raising the buffer has exacerbated.”
Mr Bell admitted changes to the mortgage serviceability buffer would not make a substantial difference for those people buying a $1m-plus house in any state, but changes to borrowing power would be noticed in affordable suburbs.
“Some banks are now talking about (cutting) 50 points in May, and more this year,” he said.
“That would mean a pretty big change in borrowing capacity overall, so any change in the serviceability buffer will help.”
This four-bedroom property at 132 Heritage Rd, Jimboomba, is on the market for offers over $1.05m.
The Property Council is also calling for APRA to make the mortgage settings easier for homeownership, particularly among first homebuyers.
“APRA should factor in first-time buyers when shaping regulations with an eye to boosting homeownership, maintaining balance and flexibility to adapt to changing conditions,” Property Council CEO Mike Zorbas said.
“With the correct financial and regulatory settings that appropriately manage risk, we can support more first-home buyers to get into the market.
“As always, supply remains the key consideration for making housing more affordable for Australians. To address this, we must streamline regulations, grow our construction workforce and remove investment-repelling taxes to support more home delivery across the country.”
This four-bedroom property at 23 Cootamundra Cres, Narangba, is on the market for offers over $890,000.
The Coalition claims lowering the mortgage serviceability test would also help those struggling to refinance or so-called ‘mortgage prisoners’, but new data from the Mortgage & Finance Association of Australia shows mortgage debt has dropped by half over the past year, as has the number of homeowners who say they are finding it harder to refinance.
University of Sydney associate professor Stella Huangfu said lowering the mortgage serviceability buffer would only increase first-home buyers’ borrowing capacity temporarily.
“This additional borrowing power could drive up housing demand, which, in turn, would likely push house prices higher,” Ms Huangfu said.
“The end result would be minimal benefit for first-home buyers since the increased borrowing capacity would mostly be offset by rising prices.”
In analysing the data, Oliver Hume’s research team used Census data for average household incomes by suburb, indexed up from Census period to the current quarter by the cumulative change in the ABS Wage Price Index.
The research is for a couple with no dependants, who are assumed to contribute equally to the gross household income and are both taxed at 2024-25 personal taxation rates.
A 20 per cent deposit, a mortgage rate of 6.05 per cent, and no lenders’ mortgage insurance requirements, have been assumed.
Borrowing capacity has been calculated based on the median price of home in the 25th percentile of sales in the past 12 months, from CoreLogic’s Market Trends Report, plus a stamp duty amount based on the assumed home price.
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