the minimum interest rate buffer based on which banks would have to assess the serviceability of home loan applications, with the aim of reducing the maximum borrowing capacity of home loan applicants. In a letter addressed to authorised deposit-taking institutions (ADIs), the financial regulator informed lenders that they are expected to assess new borrowers’ ability to meet their loan repayments at an interest rate which is at least 3.0 percentage points above the loan product rate.
Meanwhile, McEwan noted that banks are already being forced to lift fixed rates on mortgage products as a result of higher funding costs for the bank in offshore markets. However, he noted that this may be unable to slow the market down enough, and therefore the fairest and most effective way to apply the brakes with more force is for the APRA to double the rise in the serviceability buffer.
“They could always move that again,” the NAB chief noted said. “My view, and discussions with the regulator, have been that it is the simplest way to have an impact.”
