Mortgage Red Tape Is Blocking First Home Buyers, Senate Told
Australia's peak broker bodies have told a Senate inquiry that refinancing friction and complex lending rules are locking out creditworthy first home buyers.
The country's biggest broker associations have taken their case to a Senate inquiry, telling lawmakers that unnecessary red tape in the home lending system is preventing creditworthy Australians from getting into their first property — or switching to a cheaper loan when they can afford to.
The Mortgage & Finance Association of Australia (MFAA) and the Finance Brokers Association of Australia (FBAA) both gave evidence to the Senate's select committee on intergenerational housing inequity, adding their voice to a growing national conversation about how to close the gap between aspiring homeowners and the property market.
Lending Complexity Is Hurting the Right People
As The Adviser reports, MFAA chief executive Anja Pannek was careful to frame the association's position as a targeted one. The MFAA was not calling for weaker responsible lending requirements — instead, the focus was on ensuring that borrowers who can sustainably afford home ownership are not held back by unnecessarily cumbersome processes.
"Changes to lending rules will not make housing more affordable on their own, nor are we advocating weaker responsible lending standards or greater borrowing capacity as a substitute for increasing supply," Pannek said.
"Our point is narrower — when someone can sustainably afford home ownership, unnecessary complexity, duplication, or inflexibility in the lending system should not prevent or delay them."
From where brokers sit, the problem is not lenders acting wrongly — it is that processes built for an earlier era can now create real barriers for buyers and existing borrowers who simply want to switch to a better deal.
The Hidden Friction in Refinancing
One of the clearest examples of that friction, according to the MFAA, is the discharge process when a borrower wants to refinance. MFAA members regularly report variation between lenders in how long discharges take and how they are managed.
Pannek identified several specific pain points to the committee: discharge timeframes are not standardised across lenders, the process can be highly manual, discharge forms can be difficult to locate on lender websites, and in some cases a mortgage broker cannot even act on behalf of their client because of that lender's internal policy.
"All of this leads to… it slows down the process," she said.
The real-world cost falls squarely on borrowers. If someone has found a lower rate elsewhere and wants to move their loan, delays in the discharge process mean they keep paying the higher rate for longer. The MFAA's position is that a clear, consistent discharge framework across the industry would level the playing field for consumers.
If you are thinking about switching lenders, it is worth running the numbers first. Use our refinance savings calculator to understand what a rate difference could mean over your loan term, then explore the home loan refinance options available on the market.
Younger Borrowers and the Safe Harbour Proposal
The FBAA's submission focused on whether credit-policy settings might be working against borrowers who are early in their careers and whose current income does not yet reflect where they will be financially in five or ten years.
FBAA compliance specialist David Carson argued there may be scope for a "safe harbour" arrangement that would give lenders greater confidence to look at a younger couple or individual, project where their income was likely to be over time, and provide finance on that basis.
"We need some sort of a safe harbour for lenders to be able to look at a younger couple or a lower income couple and project out where they may be in a number of years' time and say we're prepared to move outside of our quite conservative thresholds to advance you funds to allow to help you into the market now," Carson said.
He was clear that the intent was not to encourage reckless lending — the concern was that the current regime effectively penalises lenders for making a responsible assessment of someone whose financial trajectory is clearly upward.
Carson also singled out lenders mortgage insurance (LMI) as a cost that lands hardest on the buyers least able to absorb it. LMI is payable when a borrower has a deposit of less than 20 per cent, and the premium insures the lender rather than the borrower — yet it is the borrower who pays it. If you are buying with a smaller deposit, our LMI calculator can help you estimate what that cost might look like.
FBAA chief executive Leo Gagic told the committee that broker feedback had pointed to a broader decline in loan applications of around 20 per cent, with brokers increasingly diversifying into commercial and asset finance in response to changing lending conditions.
Government Schemes Must Work Through the Broker Channel
Both associations highlighted the importance of government assistance programs for first home buyers, while stressing that those schemes need to be accessible through the broker channel to have their full effect.
Pannek cited Housing Australia data showing that around 74 per cent of first home buyers accessing government schemes do so through a mortgage broker. If the lenders participating in those schemes do not work with the broker channel, a significant proportion of eligible buyers simply cannot access the help they are entitled to.
"It is absolutely critical that as those schemes come to market at either the state or the federal level, that the lenders who participate in those schemes work with the broker channel to allow greater access," Pannek said.
On the federal government's Help to Buy shared-equity program, Pannek added that as the scheme expands and more lenders join, those lenders need to be ones that work with mortgage brokers.
If you are a first home buyer exploring your options, our first home buyer hub has a rundown of the main government schemes and which lenders support them.
What This Means for You Right Now
The Senate inquiry will not produce overnight change, but the evidence given by the MFAA and FBAA gives a clear picture of where the lending system could be improved for ordinary Australians. In the meantime, working with an experienced broker who understands how to navigate lender policies and discharge processes is one of the most effective steps you can take — whether you are buying your first home or looking to refinance onto a lower rate.
Before any of that, use our borrowing power calculator to get a clear picture of where you stand.
Read The Adviser's full coverage of the Senate inquiry.