In the latest tinker with home ownership, rather than addressing home affordability, the government has changed the lending guidelines for banks, with financial institutions now being told to ignore student debt.

As AAP reports:

Regulators ASIC and APRA have agreed to clarify their guidance to lenders, along with reducing serviceability and reporting requirements in for HECS debts, at the request of Treasurer Jim Chalmers.

The “commonsense clarifications” would help more Australians into a home, Dr Chalmers said.

“People with a HELP (HECS) debt should be treated fairly when they want to buy a house and we’re working with the regulators to make sure they are,” he said.

Banks had indicated they were unsure about how to interpret the existing requirements, which were holding them back from providing mortgages to some prospective borrowers with student loans.

APRA will tell banks they can exclude HECS repayments from serviceability assessments if they expect a borrower will shortly pay off their debt.

The prudential regulator will also ensure HECS is not treated as a debt for debt-to-income reporting purposes, recognising that the size of a person’s HECS repayments depends on their income.

Meanwhile, ASIC will change its guidance on HECS debts, following consultation.