SYDNEY (CU)_Following several months of speculation, the Australian Prudential Regulation Authority (APRA) last week, increased the minimum interest rate buffer based on which banks would have to assess the serviceability of home loan applications. The move came as no surprise as analysts projected such an intervention by the authorities as historically low interest rates made larger loans more affordable, thereby pushing property prices to record highs.
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. This would mean that home loans taken by new home buyers would be smaller, as experts project the APRA’s decision would reduce the maximum borrowing capacity for the typical borrower by around 5 per cent.
As a result, the savings hurdles faced by potential buyers in the Trans-Tasman nation would be…
