In a landmark move aimed at making homeownership more accessible for Australians burdened with student debt, financial regulators have agreed to relax the treatment of HECS-HELP debt by lenders. This decision comes after significant advocacy from Treasurer Jim Chalmers, who pushed for a fairer approach to student loan assessments in mortgage applications.
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What’s Changing for HECS and Home Loans?
Until now, HECS-HELP debt was factored into serviceability assessments and debt-to-income ratios, often limiting the borrowing capacity of young Australians. However, under the new regulations:
- Banks will exclude HECS repayments from serviceability assessments if the debt is close to being repaid.
- HECS will also be excluded from debt-to-income (DTI) calculations, further increasing eligibility for home loans.
- The Australian Prudential Regulation Authority (APRA) will provide clearer guidance to banks, ensuring a more consistent and fair approach.
- The Australian Securities and Investments Commission (ASIC) is set to adjust its guidance on HECS debts after consultation.
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How This Impacts Young Australians
For many young Australians, student debt has been a major roadblock to securing a mortgage. While HECS-HELP operates differently from traditional loans—requiring income-contingent repayments—it was still treated as a liability by banks, reducing the amount potential buyers could borrow. With these changes, more Australians will now have the chance to enter the property market sooner.
Anna Bligh, Chief Executive of the Australian Banking Association, welcomed the move, stating that while responsible lending rules remain essential, these changes will help Australians “safely access more credit.”
Treasurer Jim Chalmers emphasized that student debt should be viewed differently from other forms of debt. “We want to make sure that people with student debt aren’t disadvantaged when it comes to getting a mortgage,” he said.
A Long Overdue Fix?
While this regulatory shift is being celebrated, Opposition finance spokesperson Jane Hume criticized it as a “late thought bubble” and questioned its real impact. The Coalition, in contrast, has proposed an alternative strategy that would allow first-home buyers to use their superannuation savings to purchase a property.
Despite political debates, many experts see this as a no-brainer reform. Universities Australia CEO Luke Sheehy praised the move, stating: “No one should have to choose between owning a home and attending university.”
Boosting Housing Supply: A Secondary Win
Beyond HECS changes, regulators are also tackling barriers to housing development. A misinterpretation of a 2017 advisory led banks to assume that loans for apartment developments required 100% pre-sales. This misunderstanding restricted financing for new housing projects, exacerbating the supply shortage.
To address this, APRA has clarified that while banks should consider pre-sales in risk assessments, they do not need 100% pre-sales to approve loans. This clarification is expected to fast-track housing projects and help unlock more residential developments.
Westpac CEO Anthony Miller noted that these updates “offer greater certainty for developers and aspiring homeowners alike.” Property Council chief executive Mike Zorbas added that the changes would enhance apartment living options in key areas close to jobs, transport, and infrastructure.
Final Thoughts: A Step in the Right Direction
With these regulatory changes, aspiring homeowners may find it easier to secure a mortgage, while developers gain more flexibility in financing new projects. Although the full impact remains to be seen, the move marks a significant step toward addressing the housing affordability crisis in Australia.
For young Australians struggling with student debt, this is a long-overdue win that could finally open the doors to homeownership.
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