The Commonwealth Bank of Australia (CBA) has announced significant changes to its mortgage assessment policies, aimed at easing the burden of student debt on potential homebuyers. Starting April 9, 2025, CBA will no longer factor in Higher Education Contribution Scheme (HECS) debts during mortgage serviceability assessments for borrowers who can repay their loans within 12 months. This move is expected to provide relief to thousands of university graduates seeking to enter the property market.
CBA's executive general manager of home buying, Dr. Michael Baumann, explained the rationale behind this policy change. He stated, "At CommBank, we are committed to helping all Australians, including those with a HELP debt, in their home-buying journey. We regularly review and monitor our home loan policies and processes to meet customers’ needs while upholding prudent lending standards." This commitment reflects a broader trend among financial institutions to adapt to the changing economic landscape and the challenges faced by first-time buyers.
Under the new guidelines, a couple with a combined income of $140,000 per year could see their maximum borrowing capacity increase by $36,000 if they are able to repay their HECS debts within one year. For higher earners, such as couples with a combined income of $240,000, the increase could be as much as $187,000. This change is particularly significant as it allows more flexibility for borrowers who are close to paying off their student loans.
In addition to removing HECS debts from serviceability assessments, CBA is also piloting a reduction in the serviceability buffer applied to borrowers with HECS debts due to be repaid within the next five years. Traditionally, banks have added a 3% buffer to the interest rate when assessing loan applications to ensure borrowers can manage repayments if rates increase. However, CBA is considering dropping this buffer to just 1% for eligible borrowers. This adjustment could dramatically increase borrowing power and open up new opportunities for homebuyers.
Industry experts have welcomed these changes, noting their potential impact on the housing market. Costa Demetriou, a senior mortgage broker at Madd Loans, remarked, "This will make an absolutely massive difference to many homebuyers as they will also be able to borrow more money. An extra $100,000 will change the suburb you're looking in for more premium suburbs." He added that if the Reserve Bank of Australia (RBA) continues to cut interest rates, this policy shift could lead to a surge of buyers entering the market.
The Finance Brokers Association of Australia (FBAA) has also expressed support for CBA's decision, urging other lenders to follow suit. Peter White, managing director of the FBAA, stated, "While we understand that HECS is a debt and should be included in any loan assessment, the time left to repay the debt should be taken into consideration." He emphasized that the reduction in the serviceability buffer for those with one to five years left on their repayments will enable many borrowers to secure higher loans, potentially making the difference between obtaining a desired property or missing out.
These changes come as part of a broader push by the Australian government to reform how student debt is treated in mortgage assessments. In February 2025, Treasurer Jim Chalmers directed financial regulators to reconsider the impact of HECS debts on borrowing capacity. This directive has sparked a review of lending practices and has prompted discussions about the need for more flexible assessments.
However, not all industry voices are in agreement regarding the implications of these changes. Some experts have raised concerns that easing the criteria for borrowers with student debt could contribute to rising property prices. Matt Turner, managing broker at GSC Finance Solutions, cautioned, "By removing HELP from the servicing calculation, we are not factoring in a real cost the client has in their budget, so there are questions as to whether that, in itself, is responsible." He advocates for a focus on increasing housing supply rather than merely fueling demand.
The response from the broader financial sector remains to be seen, but it is anticipated that other major banks, including ANZ, Westpac, and NAB, may adopt similar policies to maintain competitiveness. This potential shift could herald a new era for homebuyers with student debts, making it easier for them to secure financing and enter the property market.
As the housing market continues to evolve, the changes implemented by CBA mark a significant step towards addressing the challenges faced by young Australians burdened with student loans. The hope is that these reforms will not only assist individual borrowers but also contribute to a more accessible and equitable housing market overall.
In summary, the Commonwealth Bank's recent policy changes represent a pivotal moment for aspiring homeowners with student debt. By excluding HECS loans from serviceability assessments and lowering the interest rate buffer for certain borrowers, CBA aims to facilitate greater access to home financing. The impact of these changes could be profound, potentially allowing thousands of Australians to achieve their dream of homeownership sooner rather than later.
