The Australian government has moved to make it easier for first-home buyers with HELP debts to secure mortgages. In a policy shift directed by Treasurer Jim Chalmers, banks will now be allowed to disregard student loan repayments when assessing mortgage applications, provided the debt is close to being paid off.
The change, implemented through revised guidance from financial regulators APRA and ASIC, aims to enhance the borrowing capacity of some prospective homeowners. It forms part of a broader effort to address housing affordability and increase access to finance. The move also comes amid a debate over lending regulations, with the Coalition considering further changes to lending criteria.
HELP debt to be excluded from some mortgage assessments
Under new regulatory guidance, banks can now choose to overlook HECS-HELP and other student loan repayments in their debt calculations for home loan applicants. This adjustment could improve the borrowing power of individuals carrying student debt, potentially increasing their chances of securing a mortgage.
According to Jim Chalmers, the changes reflect a “common sense” approach to lending. “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.
The decision follows discussions between Chalmers, APRA Chair John Lonsdale, and ASIC Chair Joe Longo, with the government advocating for clearer rules around student debt in home loan applications. APRA, which oversees banks that account for 92% of home loans, and ASIC, which regulates non-bank lenders, have now updated their policies to reflect this change.
The updated guidance also extends beyond individual borrowers. APRA will clarify that housing developers do not need to sell entire apartment blocks off the plan to qualify for financing—a move expected to speed up the construction of new residential projects.
Political and financial sector reactions to lending changes
The government’s move is the most recent in a line of policy changes pertaining to HELP that are intended to reduce financial strains. Labor rectified the HELP debts‘ abnormally high indexation from the preceding two fiscal years last year. If re-elected, it has also promised to cut all outstanding HELP loans by 20%.
The policy shift also preempts a possible Coalition move to relax mortgage lending rules more broadly. Senator Andrew Bragg, the opposition’s Assistant Housing Spokesperson, has advocated for rolling back post-Global Financial Crisis responsible lending rules. His proposals, which include reducing the three-percentage-point serviceability buffer, remain under consideration by the Coalition’s shadow cabinet.
Labor senators, however, oppose broader changes, warning they could inflate house prices, increase financial risk for first-home buyers, and create instability in the financial system. Labor Senator Jess Walsh argued that such measures would “expose first homebuyers to greater risk they cannot afford, and add systematic risk to the financial system, all without building a single home.”
