By Jack Gramenz
PEOPLE close to paying off student debts will be able to get bigger mortgages – and will need them after Australia’s median dwelling value increased $230,000 in recent years
Banks are altering how the debts are treated in mortgage applications following advice from regulators requested in February by Federal Treasurer Jim Chalmers.
The nation’s largest lender will now disregard a HECS-HELP debt when assessing a borrower’s ability to make repayments, if the debt is due to be paid off within 12 months.
“This will allow eligible customers to achieve their home ownership goals sooner,” Commonwealth Bank home buying manager Michael Baumann said in a statement.
That could add $36,000 to the borrowing power of a couple earning $140,000, mortgage broker George Samios estimated.
A couple earning $240,000 could add on another $187,000, he said.
The change comes as new data shows home values have climbed across the nation by almost 40 per cent in the past five years.
While trailing the roughly 80 per cent surges at the turn of the millennium and in the late 1980s, it far outstrips those past booms in real dollar terms, real estate analysis firm CoreLogic said.
Residential real estate nationwide is estimated to be worth $11.3 trillion, with increases attributed to existing homes appreciating in value and the addition of new builds.
A HECS debt can reduce a first homebuyer’s borrowing capacity quite substantially, adding to hurdles created by high-interest rates and loan serviceability buffers, CoreLogic economist Kaytlin Ezzy said.
“It is definitely a sticking point for a lot of people trying to get into the market,” she told AAP.
Finance Brokers Association of Australia managing director Peter White welcomed the changes.
He said those who were close to paying off their debt would find it easier to secure a loan and be able to borrow more.
