For many Australians, homeownership has felt like an impossible dream, with skyrocketing property prices, rising interest rates, and tough mortgage eligibility rules standing in the way. But now, a major change to how banks assess student debt could make a big difference—boosting borrowing power by as much as $95,900 for some homebuyers.
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This new policy shift, which exempts certain student debts from mortgage serviceability tests, could mean the difference between buying a small apartment or upgrading to a family home. However, the policy is still under consultation, and lenders will need to carefully assess who qualifies for this homebuyer boost.
So, what does this mean for Australian borrowers? Let’s break it down.
How a $95K Home Loan Boost Became Possible
Traditionally, lenders have treated student loans like any other form of debt when determining a borrower’s ability to repay a mortgage. If you had a HECS-HELP debt, it was factored into your financial commitments, reducing the amount you could borrow for a home loan.
However, under these new proposed changes:
✅ Banks may discount student debt from mortgage calculations if they believe it will be repaid in the “near term.”
✅ This means borrowers with tertiary education and steady incomes could see their borrowing power increase significantly.
✅ A single professional earning $100,000 per year could borrow an additional $56,000, while those earning $125,000 could get an extra $95,900.
These changes could open new doors for young professionals and first-home buyers who have previously been locked out of the market due to their student debt obligations.
Why Was This Change Introduced?
1. The Growing Student Debt Burden
Australia’s HECS-HELP system allows students to defer tuition payments and repay them gradually based on income. However, in recent years, soaring indexation rates tied to inflation have caused these debts to skyrocket.
- The average student debt in Australia is now around $26,500.
- On average, it takes over nine years to fully repay a HECS-HELP loan.
- Due to inflation-driven indexation, thousands of Australians saw their student debt increase overnight in 2023 and 2024.
2. Unfair Mortgage Barriers for Educated Professionals
Financial experts and housing advocates argue that student debt should not be treated the same as credit card debt or personal loans when assessing mortgage eligibility.
🏡 Swinburne University housing expert Wendy Stone highlighted how student debt has forced many young Australians to choose between pursuing education or affording a home.
💡 “For future generations to have the same employment opportunities, we need to remove the barriers that make higher education a financial disadvantage,” she said.
3. International Models Support Student-Friendly Housing Policies
Other countries, such as Denmark, heavily subsidize student housing and offer lower tuition fees to prevent financial barriers to education and homeownership. Experts argue that Australia should follow a similar approach to ensure that highly skilled professionals can still afford to enter the property market.
Who Benefits from These Changes?
The new mortgage rule changes will primarily benefit young, tertiary-educated professionals who have a stable income and a HECS-HELP debt.
🔹 A single person earning $75,000 could borrow an extra $26,800, increasing their mortgage potential to $408,500.
🔹 A single person earning $100,000 could increase their borrowing capacity by $56,000.
🔹 A professional earning $125,000 could get an extra $95,900—bringing their total borrowing capacity to $679,000.
These figures assume no dependents and an average student debt of $26,500.
How Does This Help Homebuyers?
🚀 More borrowing power means buyers can:
- Upgrade from a small apartment to a larger home.
- Move to a more desirable suburb closer to work or family.
- Have more options in Australia’s competitive housing market.
For example, in Melbourne, a borrower could upgrade from a small apartment in Springvale South (42km from the CBD) to a modern apartment in Elwood (9km from the CBD).
In Sydney, a homebuyer could move from a unit in Wentworth to a better-located flat in Homebush.
What Happens Next? The Key Question of “Near Term” Repayments
While this policy shift is exciting, the definition of “near term” student debt repayment remains unclear. The Australian Prudential Regulation Authority (APRA) is currently in consultation with banks, government bodies, and financial experts to define exactly which borrowers will qualify for this exemption.
📢 Key Considerations:
- Will all HECS-HELP borrowers qualify?
- How will banks assess whether a student loan is expected to be repaid in the “near term”?
- Will this change become a long-term policy or remain a temporary measure?
APRA has cautioned lenders to ensure that any mortgage exemptions are used prudently and make up a small percentage of total loans.
Assistant Treasury Minister Andrew Leigh has strongly backed the change, stating:
💬 “Taking HECS debt off the table when assessing mortgages is critical for helping more Australians achieve homeownership.”
Will This Policy Create Risks for Homebuyers?
While the changes could help thousands of Australians buy homes sooner, some experts warn that increasing borrowing power may not always be a good thing.
🏠 Key Risks to Consider:
⚠️ Bigger mortgages mean higher repayments – Borrowers must be sure they can afford their loans long-term.
⚠️ Interest rates remain high – If rates rise further, homeowners could struggle to make repayments.
⚠️ Housing supply remains an issue – More borrowing power does not necessarily fix affordability problems if housing stock remains low.
Sally Tindall, Canstar’s data insights director, advised first-home buyers to be cautious and not overextend themselves financially.
💬 “A higher loan amount doesn’t mean you should borrow the maximum the bank offers,” she warned.
Final Thoughts: A Step in the Right Direction for Homebuyers?
This new policy represents a major shift in how student debt is treated in the home loan approval process. By removing HECS-HELP debt from serviceability calculations, the government aims to help skilled professionals break into the housing market sooner.
However, borrowers should weigh the risks carefully before taking on larger mortgages, ensuring they can comfortably afford repayments even in an uncertain economic climate.
With APRA still finalizing the details, Australians will need to watch closely to see how this policy evolves and whether it truly delivers a lasting solution to housing affordability challenges.
Would You Qualify for a Bigger Home Loan Under This New Policy?
If you have a steady income, a HECS-HELP debt, and dreams of homeownership, this could be your chance to secure a larger mortgage. But before jumping in, make sure to assess your financial situation carefully and consult with a mortgage expert to see how these changes apply to you.
💬 What do you think? Will this policy help first-home buyers, or will it create new risks in the housing market? Share your thoughts below!
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