APRA did FHBs ‘no favours’

The Australian Prudential Regulation Authority (APRA) has come under fire for its decision to maintain the serviceability buffer at 3 per cent, with strong reactions from brokers who said the move will hinder Australians’ ability to enter the property market.

In a discussion among brokers, Homeloanexperts.com.au senior broker, Jonathan Preston, expressed his frustration with the regulator’s stance.

“The regulator is throwing Aussie families under the bus,” Preston said.

“By keeping the buffer at this level, the APRA keeps first-home buyers crippled and unable to buy across most of the country. The government’s high spending has left the RBA unable to cut rates rapidly. So without APRA assistance, Australians remain locked out of homeownership on a wide scale.”

Preston further explained how the combination of government spending, high rates, and the APRA’s decision is creating an increasingly difficult situation for prospective home owners.

“So now we have the perfect storm of government intervention propping up rates and the APRA maintaining a large buffer, which is hampering the ability of everyday Australians to simply get off the rental hamster wheel and get into the property market,” he said.

Broker Sid Bajracharya also criticised the decision, saying that the high buffer rate contradicts other government efforts aimed at assisting Australians to buy homes.

“The Family Home Guarantee, which allows the purchase of a home for just a 2 per cent deposit, aims to help single parents, and is affected by this decision because many single parents are not able to buy – the high buffer rate cripples their buying power,” Bajracharya said.

He further said that the decision forces many Australians to continue renting rather than owning property, thus missing out on the opportunity to build equity: “With living expenses and rent both high, they are struggling.

“But if the buffer rate were decreased to a certain acceptable level, at least they could get a mortgage and receive equity as a return on their repayments, whereas they receive no return on paying rent.”

Broker Sheng Ye shared his perspective on what he believes are the APRA’s motivations for maintaining the high buffer.

“I think the main reason for keeping the buffer at 3 per cent is to prevent the property market running too hot and avoid people borrowing too much debt. If APRA reduces the buffer below 3 per cent, it will enhance the borrowing capacity for purchasers and this will fuel the property market,” Ye said.

“The Australian property market has been running hot for the last two years. Neither the APRA nor the government wants to add more fuel to this market.”

Finally, broker Steven Chan said that the serviceability buffer is likely to continue moderating property market growth, particularly affecting first home buyers. However, he said that investors are less likely to feel the impact.

“Investors have more options to side-step the buffer,” Chan said. “Also, investors are getting higher yields than ever and many of them bought pre-Covid, so this doesn’t affect them as much.”

[RELATED: APRA leaves serviceability buffer unchanged]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.