iscover
iscover 
Research commissioned by the Finance Brokers Association of Australia (FBAA) and conducted by CoreData has found that lowering the 3 per cent serviceability buffer imposed by the Australian Prudential and Regulation Authority (APRA) to 2.5 per cent could result in a boost to borrowing capacity by $276 billion nationally.
According to the research, 268,862 more Australians could gain access to median home loans, excluding those limited by deposits. This would mean the required income needed to service a mortgage on the median home loan would drop from $74,332 to $70,662.
This would be particularly beneficial to younger buyers in the 25–34 age bracket, bringing 119,000 more potential buyers above the approval threshold, equating to a 12 per cent increase.
Additionally, almost 400,000 first home buyers within this age cohort would benefit, with those using a 5 per cent deposit seeing the largest access gains for loans under $900,000.
Peter White, FBAA’s managing director, said both the Australian Labor Party and the Coalition should “now make a pre-election commitment to reduce the rate”; however, he acknowledged that the Coalition has already made this intention clear.
“We’ve said for a very long time that this simple move would make a massive difference to the housing market because we are talking about people who can afford to service these loans,” he said.
The research also found that a reduced buffer could ease loan stress among current mortgage holders, freeing up more for refinancing.
“This will, as we have stated before, free mortgage prisoners who are locked into higher rates unable to refinance due to the serviceability rate,” White said.
Ashley Fisher, broker at Hello Funding, said reducing the buffer by 0.5 per cent can significantly benefit borrowers, even with interest rates due to fall over the next few months.
“With the series of rate hikes we’ve experienced over the last two years, many clients have found it harder to secure the funding they need. A lower buffer gives them more room to move,” Fisher said.
“Many clients are still feeling the impact, so reducing the buffers can boost their borrowing capacity now, while future rate cuts can offer added flexibility.
“While I definitely believe a buffer is necessary, I don’t think a 3 per cent buffer is required. It may be a bit too high for many clients, especially as the market adjusts. A lower buffer could still provide adequate protection while improving clients’ borrowing capacity.”
However, while this may unlock more access to property, a 50-bp buffer may increase house prices, similarly to what was seen in Canada in 2018, inadvertently reducing access.
While White acknowledged this from the research, he said that initiatives from both sides of politics to boost the housing market would already drive up prices.
“Any initiative to make housing more accessible has the potential to result in property values increasing due to supply and demand, but the bottom line is that this is a very effective way to help hundreds of thousands of people enter the market, and remain in the market,” White said.
[RELATED: The Coalition’s buffer plan: A long-term solution or ‘short-term sugar hit’?]
