Westpac used its submission to the committee to call for reforms to tackle the “root cause” of the housing shortage to boost the construction of new homes. It said APRA should also adopt a “more flexible approach” to risk tolerance in the property construction sector and give banks more flexibility to lend to property developers to help accelerate house-building.

But ANZ and NAB say APRA’s rules are preventing a host of aspiring home buyers from entering the property market.

ANZ, in its submission to the inquiry, said the existing buffer, along with high house prices, was restricting credit to wealthier households. Meanwhile, National Australia Bank has called for the buffer to be reduced and for student debt to be removed from loan assessment calculations for first-time home buyers.

Housing affordability and homeownership have become a major political battleground as young people become increasingly locked out of the housing market due to record prices and a shortage of properties.

The Coalition launched a Senate inquiry in August. Committee chair and opposition assistant spokesman for home ownership, Andrew Bragg, said letting APRA dictate rules around mortgages was lazy and unimaginative.

“Recalibration of mortgage rules for first home buyers must be on the agenda,” he said.

“It’s one of the only ideas on the housing policy smorgasbord which would have an instant impact for first homebuyers. 50,000 new first homebuyers dwarfs anything Labor has delivered or proposed in their term in office.”

The Barrenjoey analysis does find the changes would raise the borrowing capacity of first-time buyers of between 1 per cent and 3 per cent.

The current average mortgage for a first-time buyer is $500,000. The increase in borrowing capacity is worth between $5000 and $15,000, which could then be used to bid up prices.

Consumer Policy Research Centre chief executive Erin Turner is worried by the suggestion that lending standards should be relaxed to improve access to homes. She said the focus instead should be on making housing more affordable.

“We’re aware that some industry players have put forward ideas I had hoped were long dead, ideas like adjusting responsible lending obligations,” Turner said.

“Properties cost a lot more than people are earning. Solutions can’t be about loading people up with more debt. We have to look at the underlying cost of the asset.”

APRA is staunchly backing the current lending rules, telling the committee in its submission that the 3 per cent buffer on mortgages was “prudent”.