For many young people with a student loan, it’s a struggle to get a mortgage signed off towards home ownership and the housing crisis hasn’t made this easier. But new government changes might finally be addressing this issue.
The government has announced it is working with financial regulators to update their guidance on how HELP (Higher Education Loan Program) debts affect home loan applications and this could hold big implications for young Australians still paying off debt from their uni days.
Curious about what this means for you? Here’s everything we know.
So what exactly is changing with mortgages?
Two leading financial regulators — the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) — are set to update their rules around how banks assess home loan applications for those with student debt.
These bodies oversee the banks and other lenders, making sure they comply with regulations when it comes to lending money.
Under current rules, banks factor in HELP repayments when determining how much they’re willing to lend, which can be a barrier for some first-time homebuyers. But new guidance is aiming to allow more flexibility, especially if the debt is due to be paid off soon.
Treasurer Jim Chalmers said these “commonsense changes” are designed to help “more Australians into a home” and are a practical step in addressing the housing crisis.
“People with a HELP debt should be treated fairly when they want to buy a house and we’re working with the regulators to make sure they are,” he said in a statement on Wednesday.
It was also one of the recommendations of the universities accord report, released in February 2024, that bank lending practices are reviewed to ensure they “recognise that HELP loans are not like other types of loans” and are not treated “in a way that unduly limits peoples’ borrowing capacity for home loans”.
Additionally, a Senate inquiry into housing affordability heard from investment bank Barrenjoey that it’s “counterintuitive” to limit the borrowing capacity of graduates with high future earnings potential, just because they have student debt, as reported by the Sydney Morning Herald.
The publication noted the number of Australians with a HELP debt of over $100,000 grew to 56,700 in the last financial year, compared to just under 48,000 back in 2022-23, according to Australian Tax Office data.
How will this help young people?
Student debts like HELP have been a significant hurdle when trying to secure a mortgage and get on the property ladder and the latest announcement could remove a significant roadblock for many young Australians.
But that’s not all. The government said it is also addressing the issue of unlocking finance from the banks to get more housing projects approved — hopefully improving the supply of houses.
At the moment, some banks have been interpreting regulators’ guidance for developers to pre-sell all units in a building project before granting loans. Understandably, this has made it difficult for various developers to get projects off the ground.
With the changes, APRA said it will communicate to banks that while it expects them to consider the extent of presales as part of prudent credit risk management, it does not expect 100 per cent pre-sales.
The Australian Banking Association has welcomed this and its chief executive Anna Bligh remarked there is merit in “carefully considered” updates that could help Australians safely access more credit.
“Whilst the challenges of reducing barriers to home ownership won’t be solved by one single factor, these clarifications should assist in unlocking more credit for some of those looking to enter the property market,” she said.
Mortgage changes criticised as a “desperate attempt” to woo young voters
However, the government’s latest move isn’t without its critics, with Greens Deputy Leader Senator Mehreen Faruqi saying the change comes “too little, too late”.
In a statement on Wednesday, she explained the real issue should be the existence of large student debts, not how banks interpret lending rules.
“We have heard for years now that massive student debts are locking people out of the housing market, and finally, in the dying days of the Albanese Government’s first term, they’ve decided to do the bare minimum in a desperate attempt to win young voters,” she said.
“The problem here is the fact that student debts exist and grow every year. Banks won’t solve the student debt crisis, only governments can.”
With this, the Greens are pushing for a complete wipe of student debt, which they say is the key approach to addressing the problem.
Max Chandler-Mather, Greens spokesperson for Housing and Homelessness, further criticised the government for not addressing the root cause of the housing issue — soaring house prices.
“Rather than asking banks nicely, why doesn’t the government do their job and take real action, starting with phasing out negative gearing and the capital gains tax discount for investors with multiple homes,” he said.
“Record high house prices have pushed home ownership out of reach for millions and the Housing Minister has said Labor wants house prices to keep increasing, and now their solution is asking the banks nicely. What a joke.”
Look, if it feels like you’ve been seeing a lot more student debt-related news lately, you wouldn’t be mistaken — because this marks the third student loan-related policy change proposed by the government in recent months.
It follows changes to the way that HECS debt is indexed in November and Labor’s latest commitment to a 20 per cent cut on all student loan debts last week, if re-elected.
And while we’re on the fence on whether this latest move will necessarily solve the housing crisis, maybe it’s a big step in the right direction?
Lead image: Getty Images
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