For past years, students requiring loans to purchase a home need to undergo the same process for HECS repayment calculations determining their borrowing capacity as in personal or credit loans. This made it difficult for them to apply for these mortgages. There was an impact on their borrowing even if they were presently not required to repay the HECS.
No matter whether the student is unemployed or earning under $54,435 in 2024-25 or $67,000 in 2025-26, they need to follow the same repayment process. This has increased the eligibility barriers for students while accessing mortgages due to HECS or HELP and thus requires improvements in guidelines. Due to this, the financial regulators have now been instructed to improve the guidelines to ease the application process for student debts for purchasing a home.
The situation has further raised concerns for first-time home buyers, as pending repayments can significantly reduce their borrowing limit. Also, research revealed that, for 73% of home buyers, housing affordability is a challenge, while another research suggested using super funds for home buying can be a good option. Thus, officially, APRA (Australian Prudential Regulation Authority) and ASIC (Australian Securities and Investments Commission) have been instructed to improve the guidelines.
APRA and ASIC will now update the guidelines on HELP debts after the discussion. This is because the people with HELP debt must get fair treatment while buying a house for which the regulators are working. These changes will ensure first-home buyers can afford a home easily.
However, recently the new rules highlighted that banks can ignore the serviceability of a student debt while considering home loan applications, but with certain conditions. It means not every individual will get the exemption from complex home loan eligibility criteria subject to specific regulations and conditions of banks and financial institutions. Further, banks may consider this eligibility for people who can repay their loan within a year.
This is because nearly 3 million people hold a HELP debt in 2023-24, as per the Australian Tax Office and repayments of these debts are taking a long time to pay off. This has been a major concern for the past decades till now, which drove the government’s decision to keep the eligibility criteria to just 1 year to pay off student debt.
Hence, students holding student debt can now expect fair treatment in the lending process by banks due to this decision. They can apply for home loans without any concerns. First-home buyers will also find it easier to enter the housing market and get into their dream property. However, they need to make sure to comply with the eligibility criteria to repay their loans within 1 year from the date of loan approval.
It means that this decision can be considered as the right step towards improving housing affordability challenges in Australia, especially for students and first-home buyers.
For more such insights, refer to our website at Nfinity Financials or contact us at 1300 GET LOAN (1300 438 562) or 0456 456 267.
