- Scott Pape dismisses Coalition's housing proposal
- Michael Sukkar aimed at adjusting lending criteria
- READ MORE: Barefoot Investor advises Australians to prepare for potential cost-of-living challenges
The Barefoot Investor has strongly criticized a suggestion from the Coalition to relax borrowing regulations with the aim of assisting Australians in purchasing homes, arguing that this would merely lead to higher real estate costs.
Scott Pape stated this following an inquiry from worried tenant Penny, who reached out regarding a proposition that was advocated for by the opposition. housing minister Michael Sukkar.
"I am 32 years old, work as a teacher, and currently live in rented accommodation with my partner who is also a teacher," she penned.
We're putting in a lot of effort and cutting costs wherever possible, but the notion of becoming homeowners seems out of reach. Melbourne It still seems unattainable.
We don't have wealthy parents or co-signers — my mother is also a renter, 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 can’t rely on financial support from their parents. Does this have implications 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 gain power in the upcoming federal election. election .
The Australian Prudential Regulation Authority, which serves as the financial watchdog, mandates that banks must assess home loan applicants based on their capacity to manage their mortgage payments considering both the prevailing interest rates along with an extra three percent.
Previously, 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 applying for a mortgage, the bank verifies whether you can still manage the payments even if interest rates increase," he penned in his newspaper column. 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 debt than they can handle when (let’s face it, if) interest rates increase.
And, as a financial counselor, I believe this is a very wise policy that maintains pressure on bankers.
Mr Pape stated that Mr Sukkar had a different perspective.
"He contends that reducing the initial deposit requirement would enable first-time homebuyers to secure larger loans. This statement holds merit," he noted.
But let's consider this for approximately six seconds: Reducing the buffer would allow everybody to borrow more – which they certainly would – and all that would accomplish is pushing housing prices even higher.
Sukkar’s plan is akin to eying the last limp dim sim that has been languishing in the servo steam cabinet since last weekend.
Penny, I understand you're hungry, but if you decide to consume whatever Sukkar is offering, ensure you keep a Hazmat suit close at hand, a frozen pack of toilet paper ready, and a plumber on call.
When the statement was made, Mr Sukkar indicated that there was an inherent prejudice supporting wealth passed down through generations.
"At present, those Aussies who can’t rely on the 'Bank of Mum and Dad' face higher lending fees — despite the genuine risk being the same or perhaps even smaller," he stated.
'This represents an inherent favoritism towards accumulated wealth passed down through generations. We aim to eliminate this.'
The Coalition will not tolerate a scenario where a generation of Australians lacks the same chances for homeownership as those from earlier generations enjoyed.
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