Australia’s banking regulator, Australian Prudential Regulation Authority
(APRA), has recently introduced new lending rules that will reduce the maximum amount some people can borrow.
How might this affect my loan application?
Typically, when you apply for a mortgage, lenders are required to assess your ability to repay the loan––not on the actual interest rate, but on the interest rate plus a buffer.
A buffer, being in case the interest rates rise from where they are at the point of your application. An insurance, of sorts, assuring you might still afford your promised payments despite an interest hike.
Previously, the buffer was a minimum of 2.50 percentage points. Now, APRA has told lenders to increase it to 3.00 percentage points. With the current rates being at an all-time low, this will cause a big stir for current applicants
APRA expects this change will reduce the average person’s borrowing capacity by about 5%.
However, each person’s situation is unique. Some borrowers may not experience any reduction in their borrowing capacity. Others might experience a larger impact. This doesn’t mean you should wait to purchase, however. Rather, see it as a safeguard for those that want to enter the property market while rates are low.
What do these new rules mean for you?
It means you should make certain you understand the changes and your capacities, but on’t be discouraged. Speak to an expert to weigh up what this means for you and your borrowing power and arm yourself with information.
In this new home loan environment, it's never been more important to get help from an expert broker who's fully across the new rules.
As your broker, I can:
· Maximise your borrowing capacity so you can buy your dream home
· Show you how your borrowing capacity can change from lender to lender
· Compare dozens of lenders and hundreds of loans for you
If you believe you’ll be affected by these changes, call me today and we can prepare you for the new rules and keep you in a positive space to enter the market!