Aussies with student debt are about to get a fairer go when it comes to buying a home, thanks to a major shift in lending rules.
Treasurer Jim Chalmers has ordered regulators to tweak the way banks assess HECS-HELP debt this week, making it easier for first-home buyers to secure a mortgage.
Right now, banks treat HECS-HELP student debt the same way they do credit card or personal loan debt when assessing how much you can borrow.
This approach has frustrated many first-home buyers, as it can slash their borrowing power by tens—or even hundreds—of thousands of dollars.
But there’s a key difference between student loans and other debts: HECS repayments only kick in once you earn above a certain threshold ($54,435 in 2024-25 and $67,000 in 2025-26). If you lose your job or earn less than the threshold, repayments pause automatically.
Recognising this, Chalmers has asked the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) to update their guidance.
The goal? To ensure home loan applicants with HECS debt aren’t unfairly penalised.
“I’ve agreed [to] these changes in discussions with regulators and convened the banks to discuss them,” Chalmers said.
“People with a HELP debt should be treated fairly when they want to buy a house, and we’re working with the regulators to make sure they are. By unlocking more finance from the banks, we’ll see more housing projects get off the ground more quickly.”
APRA has already confirmed it will begin consulting on how HECS debt is factored into serviceability assessments and debt reporting, while ASIC is moving swiftly to implement new guidance.
What this means for construction
It’s not just homebuyers who stand to benefit from these changes—developers are also getting a much-needed boost.
Some lenders have been reluctant to finance apartment construction unless developers secure 100 per cent pre-sales, an interpretation of APRA guidance that has stifled new builds. Chalmers has clarified that banks don’t need to enforce this rule so strictly, which could help unlock more housing projects.
“APRA has confirmed it will communicate to banks that while it expects banks to consider the extent of presales as part of prudent credit risk management, APRA does not expect 100 per cent pre-sales,” Chalmers explained.
This shift could help smaller developers secure funding to kick-start projects without requiring all apartments to be sold before construction even begins.
Master Builders Australia welcomed the long overdue review of bank lending practices, claiming the move could go a long way to erasing the unrealistic finance requirements currently choking the construction industry.
“This is a sensible first step in encouraging more investment into the industry and tackling housing supply and affordability challenges,” said CEO Denita Wawn.
“HELP repayments are unfairly weighted in serviceability assessments and restrict the ability for first-home buyers to purchase a home.”
Wawn also noted that strict pre-sale requirements make it difficult for builders to access finance, leading to fewer new homes being built. She urged regulators to continue reviewing lending practices that place excessive risk on builders and developers.
Industry backs the move
The banking and property sectors have welcomed these changes, saying they will improve access to finance and help tackle Australia’s housing shortage.
Anna Bligh, CEO of the Australian Banking Association (ABA), praised the move, saying it will provide much-needed clarity for lenders.
“Banks support responsible lending rules to protect borrowers and ensure they can repay their loans,” she said. “However, there is always merit in carefully considered updates to regulatory guidance that may help some Australians safely access more credit.”
Property Council CEO Mike Zorbas also backed the changes, calling them a “common sense” approach to housing affordability.
“Many Australians need more apartment living options around jobs, opportunities, and transport,” he said.
“Australian apartment construction is half the volume it was in 2017-18. Overly restrictive lending regulations shouldn’t hamper the ability to supply new homes when we need them most.”
What this means for first-home buyers
For Australians looking to break into the housing market, these changes could mean better borrowing power and a fairer shot at homeownership. If you’ve been knocked back for a mortgage due to your HECS debt, it might be worth checking in with your bank or mortgage broker once these new rules take effect.
With housing affordability still a major challenge, every step toward making homeownership more accessible is a win.
