- Scott Pape dismisses the Coalition's housing proposal.
- Michael Sukkar aimed at tightening lending criteria
- READ MORE: Barefoot Investor advises Australians to prepare for potential increases in living costs.
The Barefoot Investor has strongly criticized a suggestion by the Coalition to relax borrowing regulations with the aim of assisting Australians in purchasing homes, arguing that it will merely inflate 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 party. housing minister Michael Sukkar.
"I am 32 years old, work as a teacher, and currently live in a rented place with my boyfriend who is also a teacher," she mentioned.
'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 come from families without wealthy parents or guarantors – my mother is also a renter, and my partner’s parents are still paying off their own house.'
'I was scrolling through property updates when I came across an article citing...the Liberal Party’s intentions to relax borrowing regulations to assist purchasers who don’t have financial support from their parents...is this relevant for folks like us, or is it merely election-season chatter?'
Mr Sukkar disclosed on Tuesday that his focus would be on the serviceability buffer for home loans should the Coalition regain power 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.
Earlier, the buffer stood at 2.5 percent, but it was increased during the Covid pandemic.
The Barefoot Investor stated that the buffer serves as a 'stress test'.
"When you apply for a home loan, the bank verifies whether you can manage the payments even if interest rates increase," he penned in his column for NewsCorp .
'If the interest rate is 6 percent, they check if you can still manage the payments at 9 percent.'
It's referred to as a 'stress test' — designed to prevent individuals from taking on more debt than they can handle when interest rates increase.
And, as a financial counselor, I believe this is a very wise 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 penned.
However, consider this for approximately six seconds: Reducing the buffer would allow everybody to borrow more — 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 languishing in the servo steamer since last Sunday.
Penny, I understand you're hungry, but if you decide to consume whatever Sukkar is offering, ensure you keep a Hazmat suit nearby, a frozen toilet paper roll ready, and a plumber on call.
When the announcement was made, Mr Sukkar stated that there was an inherent bias towards accumulated inheritance.
He stated, 'At present, those Aussies who can’t rely on the "Bank of Mum and Dad" face higher lending rates — despite their risks being the same or lesser.'
'This is an inherent bias towards accumulated wealth. We aim to eliminate it.'
The Coalition will not agree to a scenario where a generation of Australians lacks the same chances for homeownership as earlier generations had.
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