The APRA had recently conducted the final hearings for the inquiry into financial regulatory framework and home ownership on 24 October 2024. In its remarks, APRA stood by the 3% serviceability buffer, claiming it is crucial for confidence and stability. However, many disagree.

A publication from APRA in February 2025 outlined that they have begun consulting on proposed changes as to how banks treat Higher Education Loans (HELP/HECS) debts repayments when assessing home loan repayments. APRA has no specific rules or guidance in relation to HELP repayments beyond asking the banks to include HELP/HECS debts when reporting data on debt-to-income ratios.

However, current industry practice is for banks to consider these debts when assessing an applicant’s ability to service a home loan.

APRA acknowledges that HELP/HECS debts are different from most other debt reductions because a borrower’s repayment obligations are determined by their income and not by the size of their debt or interest rates.

Presently, lenders’ serviceability models encompass HELP/HECS liabilities and ascribe a monthly cost to the borrower’s ability to service current and proposed borrowings.

I personally have seen how on many occasions this “liability and monthly expense commitment” greatly reduces the borrower’s loan amount or “failure to meet the lenders overall serviceability criteria.”

APRA has now written to the banks seeking feedback on the following adjustments :-

• Removing HELP/HECS debts from debt -to-income ratios
• Clarification for an exemption of their HELP/HECS loan from serviceability assessment in cases where a borrower is expected to clear their debt in the near future.

A decision is expected in the second half of 2025.

 

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