APRA's increased lending restrictions will hit first-home buyers the hardest — HIA

HIA's chief economist weighs in on the matter

APRA's increased lending restrictions will hit first-home buyers the hardest — HIA


By Micah Guiao

Since the Australia Prudential Regulation Authority (APRA) announced a plan to tighten its regulations on banks and lenders to cool the property market, many economists and brokers have voiced concerns that first-home buyers will be pushed even further out of the housing market.

Tim Reardon, chief economist of Housing Industry Association, said that over 90% of renters want to own a home, but APRA’s decision will make it even harder for aspiring homeowners to achieve this.

Earlier today, the APRA announced that it would increase its “serviceability buffer” for a new mortgage from 2.5% to 3%. Since then, questions have been raised if this move was more a bane or a boon.

“Australia has an unquestionably strong financial sector. It has withstood significant shocks, such as the Global Financial Crisis and the COVID recession, without the emergence of financial contagion,” Reardon said. “The share of loans that are impaired is exceptionally low, at around 0.4% of all loans issued. This is significantly lower than in other developed economies.”

However, APRA chair Wayne Byres said the intention behind the updated regulation was to ensure that “the financial system remains safe, and that banks are lending to borrowers who can afford the level of debt they are taking on.”

Although increased regulations are proven to bring down mortgage delinquency, Reardon said the number was already low to begin with.

If anything, the new lending condition spells bad news for first-home buyers, who are already struggling to enter the already restrained market, HIA said. In August, first-home buyers accounted for only 35% of all owner-occupier loans – and that number is expected to decline.

“First-home buyers are the group who are typically constrained by serviceability thresholds. It is this group that will be hit the hardest by these changes,” Reardon said. “Restricting access to credit for new households seeking to enter the housing market will put further downward pressure on the rate of homeownership in Australia.”

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