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The Commonwealth Bank of Australia (CBA) has introduced changes to how HECS-HELP debt is assessed, allowing better access to funding.
Coming into effect today (9 April), CBA will no longer consider HECS debt if it is due to be repaid within 12 months.
Further, borrowers with a HECS debt due to be repaid within the next five years will be assessed using only a 1 per cent serviceability buffer.
These changes come off the back APRA’s proposed changes to the handling of HELP and HECS debt and ASIC announcing guidance for lenders at the start of March.
Dr Michael Baumann, CBA’s executive general manager home buying, said in a statement: “At CommBank, we are committed to helping all Australians, including those with a HELP debt, in their home-buying journey, by providing a range of flexible lending policies, competitive rates, innovative tools, and expert guidance.
“We regularly review and monitor our home loan policies and processes to meet customer’s needs while upholding prudent lending standards.
“Following APRA’s recent statement regarding HELP debt, we have introduced alternative home loan servicing methods for customers who can repay their HELP debt within five years. This will allow eligible customers to achieve their home ownership goals sooner.”
The Finance Brokers Association of Australia (FBAA) welcomed the changes and has urged other banks to pass along the government’s recommendations.
“While we understand that HECS is a debt and should be included in any loan assessment, the time left to repay the debt should be taken into consideration,” said FBAA managing director Peter White.
“Furthermore, the reduction in the serviceability buffer for those who have between one and five years left on their repayments will be a significant help and enable many to not only reach the threshold to get a loan, but to secure a higher loan that may mean the difference between securing the property they seek, or missing out.
“We urge other banks to do the same so that even more people who can afford a loan, can enter the market and increase their personal wealth.”
These changes will open up opportunities for those managing student debt. George Samios, founder of Madd Loans, believes the other lenders will follow suit.
“A couple who earn $70K each and have HECS repayments that end within 12 months will now be more likely to meet lending criteria, and potentially be able to borrow an additional $36K. A joint couple under the same scenario earning $240K can now borrow an additional $187K,” said Samios.
“If your HECS debt is due within the next five years, under the new CBA policy, your entire loan will be assessed at 2 per cent less than normal, and this makes an absolutely massive difference.
“I expect other banks will follow. This allows thousands of people who previously could not borrow due to their HECS debt to enter the property market.”
