Australian Government introduces revisions to mortgage regulations to support young home ownership

The Property Council of Australia has welcomed today’s announcement to revise banking regulations, making it easier for young Australians to access mortgages and for developers to get housing projects underway more quickly.

"This is the right balance for regulators and the government to strike," said Property Council chief executive Mike Zorbas. 

"Many Australians need more apartment living options around jobs, opportunities, and transport.

"Australian apartment construction is half the volume it was in 2017/2018. 

“Just as access to a mortgage shouldn’t be the domain of only the super-wealthy, overly restrictive lending regulations shouldn’t hamper the ability to supply new homes when we need them most.

"We have been warning federal and state governments that investment settings in the high-density living they say they want are actually a handbrake on new construction.

"The next step is for state governments to revise down the foreign investment over-taxes that stop projects getting to critical lending mass." 

HECS Debts to be excluded from loan assessments 

As part of the revisions, Australia’s financial regulator, the Australian Prudential Regulation Authority (APRA), will now advise banks to exclude HECS debts from loan serviceability assessments if the debt will be paid off soon. 

This follows the Albanese Government’s push to make it easier for young Australians with student debts to buy homes, urging regulators to reassess how student debt affects mortgage applications.

Treasurer Jim Chalmers emphasised the importance of these changes, calling them “common sense” adjustments that will help more Australians into a home. 

“People with a HELP debt should be treated fairly when they want to buy a house, and we’re working with the regulators to ensure they are,” said Jim. 

In 2022, APRA informed banks that they should include HECS-HELP debt in their debt-to-income ratios when assessing a borrower’s loan eligibility. While this was not a directive, it led to banks treating student debt as part of their overall lending strategies, often negatively impacting young Australians’ borrowing power. 

With the updated guidelines, HECS-HELP debts will no longer be treated as unsecured loans, which had previously placed them on par with credit card or buy-now-pay-later debts.

Sense of relief for first-home buyers 

Housing minister Clare O'Neil said the changes will mean aspiring homeowners aren't "overly impacted by student loans."

"For a generation of Australians, the prospect of home ownership feels too far away, and being a renter has never felt more insecure," Claire said.

"This is a common-sense measure that will make a material difference to first-home buyers, giving them more borrowing power to get into their own home sooner.”

First-home buyers have already started returning to the market 

According to AD Group’s recent FY25 Q2 off-the-plan market insights report, first-home buyers are slowly gaining confidence in the off-the-plan market and have been trailing downsizers by only 4% nationally. 

”This is incredibly positive to see, and with this new Government incentive, it means more first-home buyers will be able to enter the property market sooner,” said AD Group’s founder and general managing director Tom Hywood. 

“This will not only help individuals and families achieve their homeownership dreams but also stimulate the construction industry and the wider economy." 

The growing confidence of first-home buyers in the off-the-plan market signals a positive shift in the real estate landscape.

More to come. In the meantime, read more off-the-plan property news here.