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Home Loan Handbook
Stock MarketThe Insurance Council of Australia (ICA) has thrown its weight behind the federal Coalition’s proposal to revamp the way the Australian Prudential Regulation Authority (APRA) applies capital requirements to home loans supported by lenders’ mortgage insurance (LMI). This move is part of a broader effort to enhance housing affordability and resilience in the country.
As outlined in the Coalition’s pre-election policy platform, the proposed change aims to prompt APRA to update its Statement of Expectations, specifically focusing on the capital treatment of loans backed by LMI. Currently, APRA employs varying risk weights for home loans depending on whether they are guaranteed by government schemes, parental support, or insurance, creating an imbalance that the ICA has urged regulators to rectify.
The proposed policy by the Coalition would level the playing field for LMI-backed loans to better compete with those supported by government initiatives. Welcoming this proposal, the ICA has intensified its advocacy efforts through its policy document “Advancing Australia’s Resilience,” urging policymakers to standardize the regulatory capital framework.
The ICA emphasized that equalizing LMI-backed loans with those supported by the Home Guarantee Scheme or parental guarantees would mitigate inconsistencies and pave the way for more prospective homebuyers to enter the property market sooner. According to ICA CEO Andrew Hall, these reforms represent a positive step towards enabling more Australians to achieve homeownership.
Simultaneously, the federal government announced additional spending on disaster recovery in the 2025-26 Budget, allocating $1.2 billion for disaster-related payments, including efforts related to Ex-Tropical Cyclone Alfred. However, industry stakeholders have raised concerns about inadequate investment in resilience infrastructure.
Noteworthy allocations from the budget include $17.7 million for bushfire recovery in regional areas and $5.4 million to enhance emergency broadband capabilities in collaboration with state and territory governments. New South Wales is set to receive $580 million for flood-resilient infrastructure upgrades, focusing on high-risk corridors.
In response, the ICA reiterated its call for the establishment of a $30.15 billion Flood Defence Fund, a long-term initiative proposed to be jointly funded by federal and state governments over the next decade. The National Insurance Brokers Association (NIBA) has echoed similar sentiments, advocating for bolstered resilience measures such as expanding the Disaster Ready Fund and launching a household resilience program.
Overall, the proposed overhaul of mortgage insurance loan rules and the increased focus on disaster recovery and resilience funding signify significant developments in the insurance and housing sectors, with industry experts emphasizing the importance of these reforms in ensuring a more robust and sustainable future for homeowners and communities across Australia.
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