MHLoppyBanks will be told to disregard student loans in mortgage tests
Banks will be told to disregard student loans in mortgage... #australia #hecs #apra #costofliving
It seems a bit weird to me because the loans and repayments do affect finances, making them directly relevant to loan assessments, but maybe I'd change my mind if it was the difference between me buying a home and not đ«
zero_gravitasIt seems a bit weird to me because the loans and repayments do affect finances, making them directly relevant to loan assessments
This article touches upon some more technical aspects: www.sbs.com.au/news/article/âŠ/elrkd1n69
It is understood that APRA will update the debt-to-income reporting definition so that HELP debts are no longer treated as debt for reporting purposes.
The shift would ensure student debt would no longer be treated like an unsecured loan, previously placing it in the same category as credit card or buy-now-pay-later debt.
I think itâs reasonable that HECS-HELP debt shouldnât be treated the same as credit card debt. With the indexing changes (itâs now indexed to the lower of CPI or WPI) a HECS-HELP debt is never going to grow in real terms.
Itâs only really relevant to consider the effect of the HECS-HELP repayments on net income, where it is functionally just a modifier on your marginal tax rate.
Both the ABC article and the SBS article are kind of ambiguous on one point:
ABC:
Updated guidance from financial regulators APRA and ASIC, made at the request of Treasurer Jim Chalmers, will also tell banks they can disregard HELP repayments when assessing an applicantâs ability to service their mortgage if they are due to pay off the debt in âthe near termâ.
SBS:
APRA will advise banks to exclude HECS repayments from serviceability assessments if they expect a borrower will shortly pay off their debt.
The ABC says âalsoâ in that passage, which is weird - if theyâre ignoring the debt altogether, then why do they have to mention this qualifier about âif they will shortly pay off their debtâ?
Maybe itâs in reference to the sort of idea that I was talking about? That banks wonât consider HECS-HELP as âdebtâ, only as effectively a higher tax rate, and that they shouldnât even take that into account if someone is only going to have that higher tax rate for a couple of years until the HECS-HELP is paid off, then it should be ignored entirely?
Maybe it's in reference to the sort of idea that I was talking about? That banks won't consider HECS-HELP as 'debt', only as effectively a higher tax rate, and that they shouldn't even take that into account if someone is only going to have that higher tax rate for a couple of years until the HECS-HELP is paid off, then it should be ignored entirely?
That would definitely make sense to me, but if that's what's actually happening then the reporting on it is a bit misleading imo since that's not "ignoring" or "disregard" it, just more accurately categorizing it đ I guess we might get more details on the specifics later!
Seems like a terrible idea to me. People have to repay student loans, meaning that those repayment amounts should be taken into account when determining how much money they can afford to repay on a mortgage. Disregarding them is just going to mean giving loans out that people canât afford to repayâŠmaybe thatâs the goal?
One can just pay the student loan passively through tax, no?
Sadly, I would answer affirmatively to the final question.
Yes, but it still means you have less cash in hand than if you didnât have it, so it definitely should affect your borrowing ability.
iktI think with rents how high they are thereâs people who may end up paying less if they get a mortgage they just need to get in
No1Sounds stupid.
If you donât want the debt included, then forgive the debt