Hi Scott,
I’m 32, a teacher, and renting with my boyfriend (also a teacher). We’re working hard and saving where we can, but the idea of owning a home in Melbourne still feels out of reach. We don’t have rich parents or guarantors – my mum also rents, and my partner’s parents are still paying off their home. I was doomscrolling property news (as you do) and saw an article quoting a speech by Opposition Housing Minister Michael Sukkar and the Liberals’ plans to ease lending rules to help buyers without the Bank of Mum and Dad. You’re the only finance person I actually trust – does this mean anything for people like us, or is it just pre-election noise?
Penny
Hi Penny,
Michael Sukkar is the Dim Sim of Australian politics – hot on the outside, cold in the middle – and his ideologically driven policies are a weird mix of soggy cabbage and mystery meat that will make you chunder.
Here’s the soy sauce:
When you apply for a home loan, the bank checks if you can afford it even if interest rates go up.
Right now, the government regulator makes them add 3% to the current rate – just to be safe.
So if the rate is 6% they test whether you could still make repayments at 9%.
It’s called a ‘stress test’ – and it’s there to stop people getting in over their heads if (or, let’s be honest, when) rates rise. And, as a financial counsellor, I think it’s a thoroughly sensible policy that keeps the screws on bankers.
Dim Sim disagrees.
He argues that by lowering the buffer first home buyers would be able to borrow more. Which is true.
But let’s think about it for, say, six seconds:
Lowering the buffer would mean everyone could borrow more – so they would – and all that would do is drive up housing prices even further.
Sukkar’s plan is like eyeing off the last rubbery dim sim that’s been sitting in the servo steamer since last Sunday. Penny, I know you’re hungry, but if you swallow what Sukkar is selling, well, just make sure you have a hazmat suit handy, a toilet roll in the freezer, and a plumber on standby.
(For the record, I have been equally unimpressed by Labor’s ‘Help to Buy’ first home owners scheme.)
Scott