Lowering the serviceability buffer to 2.5 per cent could unlock billions and help 270,000 more people, new FBAA research has found.
Reducing the home loan serviceability buffer by 0.5 per cent could boost total borrowing capacity by $276 billion, according to the Finance Brokers Association of Australia (FBAA).
The broker association commissioned research consultancy CoreData to analyse the impact of reducing the buffer that banks need to apply under prudential standards.
It found that around 270,000 more people could access median home loans if the serviceability buffer rate was cut from its current rate of 3 per cent to 2.5 per cent.
Nearly 400,000 first-time home buyers aged 25–34 would benefit, with those using a 5 per cent deposit seeing the greatest access gains for loans under $900,000.
Most beneficiaries of the buffer rate reduction would be aged 25–34, helping more first home buyers – nearly 40 per cent of whom are currently blocked by serviceability rules, according to the FBAA – enter the market.