Real estate peak body backs Coalition plan to ease home loan restrictions

The Real Estate Institute of Australia has endorsed the Coalition’s election pledge to review the current home loan serviceability buffer, saying it could improve housing affordability.

The Opposition has committed to directing the prudential regulator to examine reducing the 3% interest rate buffer that banks use to assess mortgage applications.

REIA President Leanne Pilkington said the move would particularly benefit first-home buyers.

“A reduction in the serviceability buffer is essential, especially in assisting first-home buyers who are disproportionately impacted by the current lending restrictions,” she said.

The Australian Prudential Regulation Authority (APRA) implemented the buffer in October 2021 to ensure responsible lending practices across various economic conditions.

Banks currently assess borrowers at an annual rate of around 10%, despite market rates being closer to 7%, after APRA maintained the buffer despite interest rates stabilising at 4.35% in late 2024.

Pilkington said changing economic conditions warranted a review of the policy.

“With the recent rate cut and the expectation of more in 2025, the 3% buffer is outdated,” she said. “It is unnecessarily restrictive and limits the borrowing capacity of Australians at a time when affordability challenges persist.”

The proposal aligns with REIA’s 7-Point Election Commitments plan presented to political parties in January 2025.

The REIA represents 85% of Australian real estate agencies, encompassing 46,793 businesses that employ 133,360 people.