APRA Leading the Way – Breaking Mortgage Rules and Increasing Home Loan Accessibility
In May, the Australian Prudential Regulation Authority (APRA) put forward a proposal to undo a key constraint put on banks and lenders.
Now APRA has announced that they will proceed with the proposed changes, which is positive news for borrowers. How? Well, the proposal suggested a change to the serviceability floor rate, and would see lenders able to independently review and set their own assessment rates, making it easier for borrowers to secure a loan. APRA’s plan means banks and lenders will no longer have to assess home loan applications (repayment ability), using a minimum interest rate of at least 7 per cent, even though official interest rates average around 4 per cent.
Authorised deposit-taking institutions (ADIs) will now be able to utilise and revise an interest rate buffer of at least 2.5 per cent over the home loan’s interest rate.
What’s prompting the changes? The removal of the interest rate floor is guessed to be due to falling house prices and record-low credit growth.
What does this mean for Australians? This simple change can increase borrowing capacity and therefore, more people can take out mortgages and stimulate the economy. So, at the end of the day, it’s a win-win!READ MORE
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