The housing market welcomes news that ANZ Banking Group will be the first lender to respond to APRA’s announcement to relax rules that have tightened the lending market for some time. We expect others to follow quickly with this initiative which is tipped to encourage homebuyers back into the market and boost lending for owner occupiers and investors.
Under the old regulations by The Australian Prudential Regulation Authority (APRA), banks were forced to assess a borrower’s ability to repay their loan assuming an interest rate rise to 7%. Under the new rules, (APRA) requires banks to apply a 2.5% loading or (sensitivity margin) to the banks current rates.
ANZ Banking Group was the first to announce that from next week, they will use a rate of 5.5% to assess loan applications.
What does this mean? Under the old rules of 7%, a bank would calculate your ability to make your repayments assuming that interest rates could rise to 7%, therefore their calculated serviceability for the lender was considerably higher than the actual interest rates. From next week ANZ will use 5.5% which means that to be approved your serviceability will be calculated 1.5% lower than presently. It also translates to borrowers being able to borrow more. How much more? Well we expect 10% to 20% more than what is presently available under the current rules.
Investors will most definitely respond positively to this news and we may start to see investors back into the property investment market.
First Home Buyers will also benefit from this initiative as their ability to qualify for a home loan will be less demanding and they will be able to borrow more than presently available.
ANZ Banking Group is unlikely to be the only lender to announce changes to their lending policies as all other major banks have announced they are reviewing their policies.
This announcement comes at a time where official lending figures for housing in May are 21% lower than last year and is likely to be well received.
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