Big Changes Coming to Mortgage Rules for University Graduates

There’s good news on the horizon for the three million Australians carrying student debt. The federal government is moving towards a significant change that could boost their borrowing power when applying for a home loan.

A university degree is a great investment, equipping graduates with skills and qualifications that often lead to higher earnings over time. However, the downside for many is the lingering HECS/HELP debt, which can impact financial decisions long after graduation.

But that could soon change, as the government is pushing for lending rules to be adjusted—potentially making it easier for graduates to enter the property market.

How HECS/HELP Debt Affects Home Loan Applications

Currently, around three million Australians have an outstanding HECS/HELP balance. Unlike traditional loans, HECS/HELP debts don’t accrue interest but are indexed annually, typically in line with either inflation or wage growth. Repayments only begin once a graduate earns over $54,435 per year (as of 2024-25), starting at just 1% annually.

That may sound manageable, but university fees have increased in recent years, and so has the indexation rate—both of which have contributed to higher average student debts. Meanwhile, house prices have soared, making it harder than ever for young graduates to step onto the property ladder.

At present, banks assess HECS/HELP debts much like any other liability—such as credit card balances or car loans—when determining how much an applicant can borrow. This significantly reduces a graduate’s borrowing capacity.

Proposed Lending Rule Changes

Recognising the hurdles faced by young buyers, Federal Treasurer Jim Chalmers has urged the Australian Prudential Regulation Authority (APRA) to update its guidelines and remove HECS/HELP debts from debt-to-income reporting. This change would mean that student debt would no longer weigh down an applicant’s borrowing capacity.

Chalmers described the proposed update as a “commonsense” move, explaining, “People with a HECS/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.”

The Australian Banking Association has also voiced its support, stating that unlocking more credit for prospective homeowners could help many Australians achieve their dream of home ownership. With APRA and ASIC on board, it’s expected that these changes will be implemented soon.

What This Means for You

If you have a HECS/HELP debt, this shift could significantly improve your borrowing power. And even if the changes take time to be fully rolled out, there are still options available to help you secure a home loan.

At Osinski Finance, we specialise in finding the best lending solutions for university graduates and first-time buyers. Our team is here to help you understand your borrowing power and navigate the home loan process with ease. 

Reach out today to explore your options and take the next step towards home ownership.

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