Australia’s prudential regulator (APRA) decided to relax strict lending restrictions that were in place on banks and other financial institutions.
What this means, is that previously the banks were applying a “stress test” to see whether home loan customers could afford (at least) a 7% interest rate on their home loan payments.
As of now, APRA have reported that banks will have the freedom to set their own serviceability buffers. The only restriction in place is that the banks ensure borrowers can repay their loans if interest rates were at least 2.5% higher than what they are currently on.
With many banks now having variable mortgage rates in the low 3’s, this means that borrowers are now likely to be tested at a rate of below 6% per annum, to determine their eligibility for the loan.
Which basically means that now people will be able to get the loan they were after and a slightly higher one at that!
Rate City have reported that a family earning a household income of $110,000 would be able to borrow approximately up to $60,000 more if their loan was assessed at 6.25% instead of 7.25%. A single person in the same scenario might be able to borrow an extra $50,000! More Australians will now find that the loan they were wanting to get would actually get approved!
Business conditions rebounding!
Following the Federal election and the first of the two recent interest rate cuts, there have been improvements in Australia’s employment and trading conditions in the month of June. NAB business conditions index for June increased, with the employment component being the most positive reading, rising three points, now about twice its long-term average.
In summary it is showing that a combination of Government action, Reserve Bank interest rate cuts and APRA intervention looks to be working to keep our economy on an even keel!
And the good news is that the 2.99% interest rates are still available and being achieved by Club members, so make sure to contact your Property Mentor or hit email@example.com for further information to get the best finance option in place for you!
Troy Gunasekera | National Manager