APRA considering easing lending criteria for housing borrowers

APRA considering easing lending criteria for housing borrowers

In further good news for home Borrowers  APRA ( the Australian Prudential Regulatory Authority)  has confirmed that they are considering relaxing the requirement to assess borrowers ability to make  loan repayments on their ability to meet loan repayments as if and when interest rates were 7.25%.

AHPRA has stated that they are considering Replacing the existing rule with a simpler one that would require Banks to add a 2.5%  calculation buffer when assessing  loan affordability.

 In practical terms this means that if interest rates fall below 4% loan affordability will be calculated at three quarters of a percent below the existing criteria. potentially this could result in Borrowers with incomes of approximately $150,000 would be assessed as being capable Are borrowing an extra $70,000. 

This comes  as interest rates  continue to fall to historical low levels  and major banks have been calling for a more common sense approach.

The requirement has been put in place to ensure that  banks use  some caution when assessing  a borrower’s ability to repay the loan if interest rates move in an upward  direction.   While the regulation has been imposed to ensure responsible lending practices,  it is now felt that in the current interest rate environment seven percent level is too high and is in fact contributing to a slowing  in the housing market.

Banks are currently arguing for assessment to be done on the basis of the interest rate plus a buffer of 2.5%.   this would enable the average loan repayment assessment to be assessed at potentially half a percent lower than is currently the case.

The changing assessment criteria could possibly make all the difference for borrowers looking to enter the housing market.

If you would like to systems with housing finance please do not hesitate to contact Australian finance hub