Last Friday 5th July, APRA finalised its proposed changes to the serviceability assessments performed on residential mortgage applications.
The regulator confirmed it will no longer expect lenders to assess home loan applications using a minimum interest rate of at least 7%.
Instead, lenders will be able to review and set their own minimum interest rate floor and utilise a revised interest rate buffer of at least 2.5% over the loan’s interest rate.
After the two recent RBA cash rate cuts, loan interest rates are now down to a low-mid 3% range. Add the 2.5% buffer to this and it’s nowhere near as high as the former 7% test, meaning an increase in borrowing power for everyone.
Today, Friday 12th July, ANZ are the first lender to announce a policy change around this.
Indicatively, a single person earning $100,000pa with a $10,000 credit card could borrow up to $84,000 more with ANZ from Monday (subject to satisfying all other credit assessment requirements). A couple with three children who earn $100,000 and $60,000 respectively, with a credit card limit of say $15,000 will indicatively be able to borrow $111,000 more.
We are expecting all other lenders to shortly announce changes in line with ANZ.
If you’ve been restricted in the past from borrowing what you needed, or would like to test your borrowing power, I invite you to connect with me.