CBA Changes Mortgage Rules, Benefits Graduates with HECS Debt – Money Advice Experts in Services

Commonwealth Bank (CBA) recently made a significant announcement regarding changes in how Higher Education Contribution Scheme (HECS) debts impact mortgage applications, potentially benefiting numerous university graduates aspiring to enter the property market.

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Effective immediately, CBA will no longer factor in HECS debt when evaluating mortgage applications if the debt is scheduled for repayment within a year. For individuals with two to five years left on their student loans, the bank will apply a reduced serviceability rate, simplifying the process of securing housing finance.

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This strategic shift by CBA comes in response to Treasurer Jim Chalmers’ call to financial regulators in February to reassess the role of HECS debts in mortgage assessments. Presently, banks are obligated to apply a 3% serviceability buffer on top of the advertised interest rate when reviewing loan applications. This requirement, aimed at ensuring borrowers can manage repayments in case of rate hikes, has hindered many graduates from venturing into the property market despite having adequate income.

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Industry experts anticipate that these alterations will significantly benefit first-home buyers. According to news.com.au, a couple with a combined income of $140,000 could potentially borrow an additional $36,000 under the revised regulations. Similarly, higher-income earners making $180,000 might see a substantial increase in their borrowing capacity, potentially up to $1.02 million.

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Peter White, the managing director of the Finance Brokers Association of Australia, praised the move but raised concerns about why the lower buffer only applies to those with student debt. He emphasized that the existing 3% mortgage serviceability buffer continues to be a hindrance for numerous Australians looking to purchase or refinance homes, despite their ability to meet repayment obligations.

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CBA’s executive general manager of home buying, Dr. Michael Baumann, confirmed the policy adjustment, emphasizing the bank’s commitment to assisting all Australians, including those with HELP debt, in their homeownership endeavors. He highlighted that the bank has introduced alternative home loan servicing methods for customers capable of repaying their HECS debt within five years, aiming to expedite their path to homeownership.

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Market analysts foresee other major banks following CBA’s lead in the near future, potentially broadening the housing market’s accessibility to numerous young Australians eager to step into homeownership.

As the mortgage landscape in Australia undergoes these shifts, it raises questions about the trajectory of mortgage rates in the country. Share your insights and predictions on the future of mortgage rates in the comments below.

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