CommBank will no longer consider HECS-HELP repayments as an expense if a would-be borrower is on track to pay the debt off within 12 months.
That means graduates and tradies who leaned on the government-provided student loans could find themselves able to borrow significantly more from this week.
"A couple who earn $70,000 each and have HECS repayments that end within 12 months will now be more likely to meet lending criteria, and potentially be able to borrow an additional $36,000," Madd Loans founder and broker George Samios said.
"A joint couple under the same scenario earning $240,000 can now borrow an additional $187,000."
See also: Borrowing power calculator
CommBank's move comes after federal treasurer Jim Chalmers urged the banking regulator to alter how banks assess HECS-HELP repayments.
Following Dr Chalmers' push, APRA reached out to banks for feedback on the removal of HECS-HELP debts from debt-to-income ratios and serviceability assessments when debts are soon to be repaid.
"The changes we are proposing today should support a more consistent approach across the sector by confirming the flexibility available to banks to consider the individual circumstances of borrowers with HELP debts," APRA member Therese McCarthy Hockey said in February.
Unlike those on other forms of debt, HECS-HELP repayments are taken from wage earners' pre-tax income and how much they repay each year is dependent on their income.
But CommBank has gone one further.
The banking giant will wipe 2% off the APRA-mandated serviceability buffer when assessing applicants due to repay their HECS-HELP debt in one to five years.
APRA has held the serviceability buffer at 3% since 2021, when it was raised from 2.5%.
That means a person applying for a home loan with an interest rate of 6% p.a. from a bank must prove they could meet repayments if their rate was to jump to 9% p.a.
Criticism of the buffer has intensified following February's cash rate cut, with experts arguing it's unlikely today's borrowers will face interest rates 3% higher than their approved rate in the foreseeable future.
"Now rates are going down, the buffer rate is a huge impediment to many, including those with HECS debts," Mr Samios said.
"If your HECS debt is due within the next five years, under the new CommBank policy, your entire loan will be assessed at 2% less than normal."
That could make a $180,000 difference in the borrowing power of a couple on a combined income at $180,000 - allowing them to borrow just over $1 million.
Such borrowing power could unlock doors in cities like Sydney, Brisbane, and Canberra, where median house prices sit between approximately $970,000 and $1.5 million.
CommBank executive general manager of home buying Michael Baumann said the bank regularly reviews and monitors its mortgage lending policies in an effort to continuously meet borrowers' needs and lending standards.
"Following APRA’s recent statement regarding HELP debt, we have introduced alternative home loan servicing methods for customers who can repay their HELP debt within five years," Dr Baumann said.
"This will allow eligible customers to achieve their home ownership goals sooner."
Finance Brokers Association of Australia managing director Peter White labelled CommBank's shift "a significant help".
"We urge other banks to do the same so that even more people who can afford a loan can enter the market and increase their personal wealth," he said.
The Albanese Government and industry experts aren't alone in calling for serviceability buffer reform.
The Coalition has pledged to push APRA to drop the buffer to 2% if it wins the federal election on 3 May.
Shadow housing minister Michael Sukkar has labelled the current level "overly cautious," highlighting its impact on first home buyers.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Row Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.79% p.a. | 5.83% p.a. | $2,931 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | |||||||||||
5.84% p.a. | 5.86% p.a. | $2,947 | Principal & Interest | Variable | $0 | $250 | 60% |
| Promoted | Disclosure | |||||||||||
5.74% p.a. | 5.65% p.a. | $2,915 | Principal & Interest | Variable | $0 | $0 | 80% |
| Disclosure |
Image by RegionalQueenslander via Wikimedia Commons
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