In its latest submission the Mortgage & Finance Association of Australia (MFAA) has highlighted the important role its members play in providing choice and competition in the home loan market, for the benefit of borrowers.
The submission to the Senate Economics References Committee’s inquiry into the financial regulatory framework and home ownership focused on four priority areas the MFAA considers critical to address, presenting eight recommendations to help improve the prospects of aspiring home buyers entering the market.
Explaining that the Inquiry was initiated to consider whether the present financial regulatory framework adequately prioritises the goal of home ownership, MFAA CEO Anja Pannek said that while home ownership remains an important goal for many Australians, representing a source of long-term financial security, the percentage of Australian households that own their own home, with or without a mortgage is decreasing.
“The path to home ownership has become increasingly challenging. The rising cost of housing has been pushing homeownership further out of reach for many Australians for a number of years.
“In today’s high inflation environment with elevated interest rates placing even further pressure on borrowers, it is increasingly prohibitive for aspiring homeowners to enter the market,” said Ms Pannek.
The key areas for attention outlined in the submission are:
“Our submission considers the appropriateness of current legislative and regulatory frameworks in inhibiting or enhancing greater pathways for home ownership and encouraging competition in the home lending sector for the benefit of borrowers,” Ms Pannek elaborated.
“The debate between the right to affordable and appropriate shelter versus the right to buy a home highlights a broader policy challenge: balancing the need for universal access to housing with the socio-economic aspiration of home ownership.”
Among the recommendations the MFAA made in its submission were a review of APRA standards, simplification of government backed homebuyer schemes and partnering with the mortgage broking industry to raise awareness of schemes.
Commenting on the recommendations, Ms Pannek highlighted the opportunities to evolve and adapt the application of regulation to encourage home ownership without causing detriment to the lending market and consumer protections.
“The APRA serviceability buffer, for example, is critical in managing systemic risk but does not always accommodate the individual circumstances of borrowers. Indeed, our members have cited the rigid application of serviceability buffers under APRA’s standards as the number one barrier to refinancing for many borrowers, especially in the context of rising interest rates,” Ms Pannek said.
“We propose a dynamic buffer that adjusts with interest rates – shifting up when interest rates decrease or down when interest rates increase – is more appropriate and will allow more Australians to become home owners.”
Ms Pannek also highlighted not only the importance of mortgage brokers in increasing awareness of government backed homebuyer schemes, but also that refining these schemes to make them more accessible will contribute to greater access to finance for first homebuyers.
“It is important to ensure an appropriate level of mortgage industry engagement as schemes are refined or new ones developed to ensure these can be accessed by potential first home buyers who use the services of a mortgage broker, given this is where most first-time buyers and first home buyers seek guidance from,” she said.
Noting that mortgage brokers educate borrowers around critical financial concepts from budgeting to navigating the home loan process to product features and benefits, the MFAA has also recommended that there be proactive promotion of their services.
“By encouraging first home buyers to see a mortgage broker in all instances will ensure more Australians are equipped with the knowledge and confidence needed to understand their options to enter the housing market and achieve financial security,” Ms Pannek explained.
The MFAA sought feedback from broker and aggregator members throughout the course of preparing its submission.
“As the peak Association for the mortgage and finance broking industry, we are the voice of our members. So, insights from our members are crucial to ensure diverse perspectives are represented and our submissions are comprehensive. We thank our members who participated in our consultation for this submission,” said Ms Pannek.
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