- Scott Pape dismisses the Coalition's housing proposal.
- Michael Sukkar aimed at tightening lending criteria
- EXPLORE FURTHER: The Barefoot Investor advises Australians to prepare for potential cost-of-living challenges.
The Barefoot Investor has strongly criticized a suggestion from the Coalition to loosen borrowing regulations with the aim of assisting Australians in purchasing homes, arguing that it will merely inflate real estate costs.
Scott Pape stated this 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 with my partner who is also a teacher," she mentioned in her writing.
We're putting in a lot of effort and cutting costs wherever possible, yet the notion of becoming homeowners seems out of reach. Melbourne It still seems unattainable.
We don't have wealthy parents or cosigners – 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 don’t have financial support from their parents. Does this policy change hold significance for folks like us, or is it merely election-season talk?
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 regulatory body for finance, known as the Australian Prudential Regulation Authority, 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 added 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 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 (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 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 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 eying the last withered dim sim that has been lingering 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 ready, a frozen toilet paper roll, 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, individuals in Australia who do not have access to the 'Bank of Mum and Dad' face higher lending fees — despite bearing similar or even lesser risks," he stated.
'This represents a systematic preference for 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.
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