Good news for home buyers!
Have you wondered why is it harder to get finance nowadays? Since 2014 it has become much more difficult to get a mortgage partly due to serviceability assessments. Banks are required by law to assess your ability to pay back a home loan by adding a buffer to the interest rate. This ensures a borrower can afford loan repayments should interest rates rise – a protection mechanism of some sorts.
Although this has been done based on good intentions to reduce higher risk lending and improve practices, it has meant that a lot of consumers are now knocked out of the market because of high interest rates. The good news is that APRA (Australia’s independent banking regulator) is planning on reducing the current 7% base rate on serviceability calculations for residential mortgages, instead allowing banks to assess loans at 2.5% above current rates. This is certainly welcome news for home buyers!
If these changes are to go ahead, this will enable more home buyers to enter the market and increase chances of getting that “elusive“ approval for a home loan. Furthermore, it will boost your borrowing power, which means you can purchase a more expensive, or better, home than initially thought would be possible.