APRA Changes + Interest Rates - how will they impact you?
There have been some big changes in the industry that could help buyers who have previously struggled with finance approvals on a larger mortgage.
We summarise two key ones that could help you start the journey to your new home at the Wildwood Estate in Carramar.
How getting a mortgage might get a little bit easier thanks to APRA changes
The Australia Prudential Regulation Authority (APRA) recently (May 2019) announced a consultation period which could see the criteria it imposes on lending institutions for assessing a client’s ability to service a loan, changing significantly.
The change is expected to be officially announced at the end of June, and it will mean that mortgages that had been previously declined, could be a reality for many West Australian buyers.
APRA is proposing to lower the minimum interest rate serviceability buffer from 7% to a level determined by the banks and other lending institutions.
For the last 4.5 years APRA has required the banks to test potential borrowers against the higher of either an interest rate of 7% or a 2% buffer over the loan’s actual interest rate, to ensure people could meet repayments if rates rise.
However, given record low interest rates, the gap has become quite high between the 7% minimum and actual rates being paid.
What does this mean for you?
It simply means many people previously unable to secure a mortgage with a traditional lending institution will now be able to.
This is particularly great news for those who have previously applied for a mortgage and have shown the ability to service it, just not at the APRA guidelines.
The Reserve Bank of Australia (RBA) moved the cash rate (for the first time in nearly three years) with a cut to a new record low of 1.25%.
The rate has sat at a previous record low of 1.5% since August 2016.
The RBA urged the banks to pass the benefits of lower rates onto their clients. This would mean borrowers with an average home loan of $400,000 could save approximately $58 on their monthly repayments.
Many banks have been quick to pass on the savings, with Commonwealth Bank the first of the big four to pass on the entire 25 basis point cut just hours after the RBA’s announcement.
This news, coupled with APRA’s relaxation of the 7% serviceability buffer coming soon, will mean a new home is officially within reach of so many more Australians.
To read the RBA’s full statement, visit: https://www.rba.gov.au/media-releases/2019/mr-19-15.html
Want more information on a block of land at Wildwood in Carramar? Call Tony on 9485 1100.
*Please note, all advice is general in nature and we always recommend you speak to a finance professional about your personal situation.