Australians with a university HECS debt will face fewer hurdles when applying for a home loan, thanks to changes urged by the Federal Treasurer.

The Australian Prudential Regulation Authority (APRA) will now allow banks to exclude HECS repayments from serviceability assessments if the debt is expected to be paid off in the short term. In these cases, HECS will also be excluded from debt-to-income calculations.

Previously, banks were cautious when lending to borrowers with HECS debts, as repayments fluctuate based on income.

The change is expected to improve borrowing capacity for some home buyers.

Australian Banking Association chief executive Anna Bligh says the update could unlock more credit, while Treasurer Jim Chalmers believes it will help more young Australians enter the property market.

“We need to recognise that student debt is different to other kinds of debt,” he says.

“We want to make sure that people with student debt aren’t disadvantaged when it comes to getting a mortgage.”

Around 3 million Australians have a HECS debt, with the average balance sitting at $22,000.