APRA to change home loan assessment guidelines, but is it for the best?
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The Australian Prudential Regulation Authority (APRA) has altered serviceability assessment guidelines for mortgage lenders, making them lower and more flexible.. 5 ways to pay off your home.
"The announcement by APRA that the mortgage serviceability test is to be relaxed is great news at a time when the potential exists for a recovery in new home building," Master builders australia chief economist shane garrett said. "Previously, mortgage loans were only to those borrowers who.
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Under the current rules, APRA requires banks (ADIs) to assess loan serviceability that looks at whether the borrower can afford a home loan interest rate that’s the higher of either: a 7% interest rate floor; or; a 2% point (200 basis point) buffer above the loan’s interest rate.
It hasn’t required that lenders change their broker process. What APRA is asking is that banks slug first time buyers even more. In the new rules, home buyers are now required to prove they can service a 7% mortgage interest rate on a loan to value ratio of less than 90% with less income being taken into account.
The minimum assessment floor rate APRA enforced was 7%. This means, if you applied for a home loan, the ADI you borrowed from would need to determine whether you could make repayments at a rate of 7%, even if the actual interest rate was lower.. ADI, ADI guidelines, APRA, APRA policy change.
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APRA supervisors will continue to monitor the trend in higher LTI lending closely, and are encouraging ADIs to use loan-to-income type metrics in their own internal risk management. The most recent element of our program to intensify APRA’s supervisory oversight of mortgage lending is a series of deep dives into ADIs’ methodologies to calculate the borrower’s capacity to repay.