- Scott Pape dismisses the Coalition's housing proposal.
- Michael Sukkar aimed at adjusting lending criteria.
- READ MORE: The Barefoot Investor advises Australians to prepare for potential increases in living costs.
The Barefoot Investor has strongly criticized a suggestion from the Coalition to relax borrowing regulations to assist Australians in purchasing homes, arguing that it will merely inflate real estate costs.
Scott Pape made the 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 penned down.
'We’re putting in lots of effort and cutting costs wherever possible, yet the dream of homeownership feels out of reach.' Melbourne It still seems unattainable.
We don’t come from wealthy families with supportive parents or co-signers—my mother is a renter too, and my partner’s folks are still working on paying off 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 don’t have financial 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 should the Coalition assume power in the upcoming federal election, his focus would be on targeting the serviceability buffer for home loans. election .
The regulatory body for finance – the Australian Prudential Regulation Authority – mandates that banks must assess home loan applicants based on their capability to manage their mortgage payments considering both the present interest rates as well as an added three percent.
Previously, the buffer was set 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 home loan, the bank verifies whether you can manage the payments even if interest rates increase," he penned in his column for NewsCorp .
'Therefore, if the interest rate is 6 percent, they check if you can still manage the payments at an increased rate of 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, being 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 allowance would enable first-time homebuyers to secure larger loans. This statement holds merit," he noted.
But let's consider this for, perhaps, 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 plan is akin to wanting the last squishy dim sim that has been lingering in the servomechanism heater since last weekend.
Penny, I understand you're hungry, but if you decide to go for whatever Sukkar is offering, ensure you keep a hazmat suit ready, a frozen toilet paper roll, and contact a plumber just in case.
When the announcement was made, Mr. Sukkar stated that there was an inherent prejudice supporting wealth passed down through 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.
'That reflects a systematic preference for wealth passed down through generations. We aim to eliminate this.'
The Coalition will not agree with a scenario where a group of Australians lacks the same chances for homeownership as earlier generations had.
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