First home buyers could get lower interest rates to buy property | The Business | ABC News

Home loans can be hard to get. Now some politicians and banks want to make it easier for more first home buyers to break into the property market. But will changing the rules create financial instability?

As the Reserve Bank meets to consider whether to follow in America's footsteps and cut interest rates, housing affordability is again centre stage of the political debate.

A Senate inquiry is currently looking into the hurdles to home ownership.
To avoid masses of Australians defaulting on their mortgages, there are several restrictions on how much banks can loan.

One of the ways lenders are restricted from allowing Australians to take on too much debt is that, when they assess a borrower for a home loan, they must consider whether that person can meet repayments for the loan at a higher rate.

Currently, the serviceability buffer is 3 per cent. That buffer means that if today, you go to a lender and they offer you a variable rate of 6 per cent, the lender will be assessing your ability to repay the loan at 9 per cent.

ANZ and National Australia Bank say there's case to ease the buffer to improve access to the housing market.
They are backed by nation's banking lobby, the Australian Banking Association, and some mortgage brokers and property groups.

But others, including Australia's banking regulator APRA and consumer groups say increasing the buffer could create too much 'risk' and leave Australians more vulnerable to taking on too much debt and losing their homes.

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