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Sydney’s housing market is under immense pressure, with first-time buyers struggling to climb the property ladder. The average house price exceeded $1.1 million in early 2025, making Sydney one of the most expensive cities in the world as a potential home owner.
As affordability worsens, the Coalition’s recent proposal to ease mortgage lending rules has sparked debate over whether it would offer meaningful relief or possibly pose greater financial risk for buyers.
Dutton’s proposal to lower mortgage buffer for buyers
On April 1, Peter Dutton, leader of the Opposition, pledged that if elected, he will direct the Australian Prudential Regulation Authority (APRA) to review the mortgage serviceability buffer, which was raised from 2.5 per cent during COVID, when interest rates were at a historically low 0.1 per cent.
This buffer, currently set at 3 percent, is added to the interest rate when assessing a borrower’s ability to repay their mortgage. Dutton’s proposal aims to help more Australians access higher loan amounts, assuming they can manage increased repayments.
Experts warn about risk of easing lending in a high interest state
However, experts argue that these changes may not significantly impact Sydney’s housing market. A Canstar analysis shows that reducing the buffer to 2.5 per cent could increase an average earner’s borrowing capacity by around $20,000; at 2 per cent, by $40,000.
Even this increase may not help buyers much in Sydney, where median housing prices remain out of reach for many.
Chief economist at Oliver Hume, Matt Bell, added that the proposed changes would not hugely affect those buying higher-end properties.
“We’re not seeing it move the needle a lot in terms of actual suburbs it changes, and those that it does are very affordable suburbs, in the very outer metro regions of Sydney.”
Sally Tindall, Canstar’s Director of Data Insights, warns that lowering the buffer could encourage people to over-leverage. “In the scheme of buying a house it ($20,000 extra) isn’t very much, it’s a small drop in a very big ocean,” she explained.
“That buffer is crucial to make sure people aren’t taking on debts they can’t repay.”
Dee Why mortgage broker James Algar agreed, emphasising that the 3 per cent buffer is a crucial safeguard. “Removing it would be irresponsible,” he said. “It ensures borrowers can weather the storm if rates rise.”
Struggle with HECS debt and high housing prices
Despite initiatives like the First Home Buyer Assistance Scheme, which are a “huge help” in waiving transfer duty on properties valued under $800,000, many buyers are still finding it difficult to break into the market.
With average house prices well above this threshold, even those benefiting might find themselves priced out.
According to the Daily Telegraph, for 26-year-old teacher Jill Radge, purchasing her first home on the Northern Beaches was challenging.
“My dream was always to live in Sydney, I grew up in The Beaches and I really wanted to buy there … I worked really hard at saving, I had small stints living out of home but I moved back home to save a big chunk of money,” she said.
“Every $10,000 of HECS debt reduces my borrowing power by $27,000,” she added. “It’s tough when your HECS debt holds you back from owning a home.”
Joseph Daoud, another Sydney broker, noted that while the buffer was designed for low interest, it remains crucial to prevent financial burden. “No one can afford a 9 per cent rate,” he said.
McGrath Pittwater agent Luke Nolan-Harris pointed out that easing lending restrictions won’t address the core issue—housing supply. “I would love to see development incentives in lifestyle locations where people want to live,” he said.
“Supply needs to be the focus, instead of incentives that will increase prices that will make it more difficult for people to buy in five years time.”
