Coalition proposes relaxation of HECS, lending rules to help home buyers

HECS debts could be deferred and lending rules loosened in a Coalition election pitch to make it easier for Australians to buy their first home.

The opposition and the Greens teamed up in the Senate again on Wednesday to establish an inquiry into laws that require banks to make sure borrowers can afford to pay off a mortgage if interest rates rise by 3 per cent.

Liberal senator Andrew Bragg.Credit: Alex Ellinghausen

Opposition home ownership spokesman Andrew Bragg said a major bank chair had recently told him the level of mortgage defaults was close to zero.

Bragg argued it was a good thing that this rate was low, but said it should be more than zero if banks were taking an adequate level of risk in helping aspirational home owners.

“If they’re not taking any risk, that means that there’s a whole group of people that are never going to own a house,” he said in an interview.

“Shayne Elliott, the ANZ CEO, says you’ve got to be a rich person to get a loan in Australia. That’s very scary.”

Bragg and his senior housing shadow minister, Michael Sukkar, are putting together a housing package, to be unveiled in the coming months, expected to combine policies on using superannuation for housing, tax changes, and incentives for states to boost supply.

A previous attempt to loosen lending rules was strongly opposed by consumer rights advocates when then-treasurer Josh Frydenberg floated the idea in 2019.

Bragg said he would not propose policies that risked a banking meltdown, such as the one that had occurred during the global financial crisis.

While mortgage delinquencies remain low by historical standards, a Moody’s Ratings analysis in May found home loan arrears were rising in every state and territory in Australia and in most local areas, with 30-day delinquency rates more than doubling in some suburbs as households struggle to manage cost-of-living pressures.

Nationally, delinquencies were at 1.72 per cent in November last year, compared with the pre-pandemic rate of 1.82 per cent in November 2019.

Bragg also wants to look at the HECS system, potentially asking banks to change the way they treat student debts or delaying the time at which young people are forced to start paying off loans.

A university review earlier this year found crippling debts forced some young people to choose between buying a home and getting an education.

The Australian Banking Association said in May that it was open to changing the way student debts were considered in home loan applications, but responsible lending rules required them to be considered in the same way as other debts. It has also previously said the matter should be referred to the Council of Financial Regulators for its examination.

Bragg said he would examine whether, for example, the law should be changed to force people to begin repaying loans only 10 years after the loans start to flow, rather than when people reach an income threshold.

‘We need to look at whether the HECS debt is undermining the Australian dream.’

Andrew Bragg, opposition home ownership spokesman

This would mean a student who graduated after four years of study with loans going back to their first year would only begin paying off the loans six years after graduating, meaning they could increase their income and accrue savings in the meantime.

“We need to look at whether the HECS debt is undermining the Australian dream,” Bragg said.

“We’re not trying to fix lending for Baby Boomers, but we’re trying to fix lending for Millennials. I don’t think it was ever envisaged that HECS would be a barrier to mortgage finance.”

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