- Scott Pape dismisses the Coalition's housing proposal.
- Michael Sukkar aimed at tightening lending criteria
- READ MORE: The Barefoot Investor advises Australians to prepare for potential cost-of-living challenges.
The Barefoot Investor has strongly criticized a suggestion made by the Coalition to relax borrowing regulations with the aim of assisting Australians in purchasing homes, arguing that this move will merely push-up real estate costs.
Scott Pape made this assertion following an inquiry from worried tenant Penny, who reached out regarding the suggestion that was backed by the opposition. housing minister Michael Sukkar.
"I am 32 years old, work as a teacher, and currently rent an apartment with my partner who is also a teacher," she shared.
'We’re putting in a lot of effort and cutting costs wherever possible, but the dream of homeownership seems out of reach.' Melbourne It still seems unattainable.
We don't have wealthy parents or co-signers—my mother is a renter too, and my partner’s parents are still paying for their house.
'I was scrolling through property updates when I came across an article citing the Liberals' intentions to relax borrowing regulations to assist purchasers who lack support from their parents. Does this have implications for folks like us, or is it merely election-season chatter?'
On Tuesday, Mr. Sukkar disclosed that his plan involves focusing on the serviceability buffer for home loans should the Coalition assume office in the upcoming federal election. election .
The financial regulator – the Australian Prudential Regulation Authority – requires banks to consider home loan applicants' ability to service their mortgage at the current interest rate, plus an additional three per cent.
Previously, the buffer stood at 2.5 percent, but it was increased during the Covid pandemic.
The Barefoot Investor stated that the buffer acts as a 'stress test'.
"When applying for a mortgage, the bank assesses whether you can still manage the payments even if interest rates increase," he explained in his column for NewsCorp .
'If the interest rate is 6 percent, they check if you can still manage payments at 9 percent.'
It's referred to as a "stress test" — designed to prevent individuals from taking on more financial burden than they can handle when interest rates increase.
And, as a financial advisor, I believe this is a very prudent policy that maintains pressure on bankers.
Mr. Pape mentioned that Mr. Sukkar had a different perspective on the matter.
"He contends that reducing the down payment would enable first-time homebuyers to secure larger loans. This statement holds merit," he noted.
However, consider this for approximately six seconds: Reducing the buffer would lead to everyone being able to borrow more funds – which they surely would – and all that would accomplish is pushing house prices higher still.
Sukkar’s strategy is akin to wanting the last withered dim sim that has been lingering in the servomechanism steamer since last weekend.
Penny, I understand your hunger, but if you decide to consume whatever Sukkar is offering, ensure you keep a hazmat suit nearby, a frozen toilet paper roll ready, and contact a plumber ahead of time.
When the statement was made, Mr Sukkar indicated that there was an inherent preference for accumulated wealth over generations.
"At present, those Australians who do not have access to the 'Bank of Mum and Dad' face higher lending fees — despite the fact that their real risk might be the same or even less," he stated.
'This represents an inherent bias towards accumulated wealth. We aim to eliminate this.'
The coalition will not tolerate a scenario where a cohort of Australians lacks the same chances for homeownership as earlier generations had.
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