Following the announcement by APRA that banks and lenders are now able to review and set their own minimum interest rate buffers, of at least 2.5% above the advertised rate of a loan, it is expected that borrowing may now become a lot easier for many, and the interest rate cuts from the Reserve Bank may finally have an impact.
For borrowers looking to buy as an owner occupier, this means that a lender can now potentially assess an applicant’s ability to repay a loan at 6 % pa, based on an actual loan rate of 3.5% pa, rather than the minimum of 7% pa or 7.25% pa.
For some investor borrowers who previously were restricted with the higher assessment rates used in serviceability, this may now give you the opportunity to grow your property portfolio.
For example, a single borrower with an income of $100,000, no dependants and assessed on standard living expenses would potentially have been able to borrow approximately $610,000 when assessed at 7.25%. The same scenario assessed under the new buffers could increase the borrowing capacity to $696,000, an increase of $86,000 i.e. over 10%.
Each individual circumstance will be assessed uniquely, and banks and lenders will apply their own policies to accommodate other risk factors. The change however will make it easier to qualify for a loan, however banks will still be stringent with their approval process and scrutinise over income and expenses, and your overall asset position.
Credit Representative 509212 authorised under Australian Credit Licence 389328.
Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.
Examples of potential repayment changes with the recent RBA reductions.
* Based on a rate of 3.3% pa
** Lenders Mortgage Insurance (LMI) maybe required for any loan over 80% of the purchase price, this has NOT been reflected in the above estimates. Estimate for $460,000 LMI of $9,400, estimate for $930,000 LMI of $23,400.
Ready to purchase your dream home or investment property?
For more information or to further discuss your mortgage loan options, please contact Philippa Brain on 0424 446 663 or email email@example.com
Director – Mortgage and Finance Specialist
Diploma in Finance and Mortgage Broking
M: 0424 446 443
Philippa has worked in the finance industry for over 16 years for major banks here in Australia and the UK in both Retail and Commercial. She loves working with her clients to help them achieve their goals, whether they are buying their very first home, buy an investment property or a business owner looking to expand their business.
Philippa works with her client’s throughout their financial journey, helping them achieve financial success.