• Changes to APRA’s mortgage servicing regulations a big win for home buyers

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    REIWA welcomes the Australian Prudential Regulation Authority’s (APRA) plans to reduce the seven per cent floor on serviceability calculations for residential mortgages, instead allowing banks to assess loans at 2.5 per cent above current rates.  

    APRA requires lenders to assess whether or not a consumer can afford a loan at a rate that is higher than what the current lending rates are, so that consumers can still afford the loan repayments, should interest rates rise. 

    REIWA President Damian Collins said if these changes are implemented it would be a huge win for WA’s struggling property market, one that would enable more home buyers to enter the market, and those who are in the market will be able to afford a better property. 

    “Our local property market has been struggling for quite some time. When APRA introduced tighter lending restrictions across the country during the rise of the Sydney and Melbourne property markets, this had huge implications for local property, with fewer buyers able to enter our already subdued market. 

    “If these changes go ahead, this will make home loans more accessible for more people in a realistic way. A seven per cent buffer was acceptable when mortgage rates were at a similar level, but now that interest rates are much lower, and expected to drop further with two rate cuts expected by the end of the year, the serviceability calculations should reflect this.

    “If APRA introduces these changes and the banks pass the expected rate cuts on to borrowers, the assessment rate will drop from approximately 7.25 per cent to around six per cent. This will open the door to many more buyers, who will now be able to take out a loan had it not been for the high serviceability calculations,” Mr Collins said. 

    APRA will undertake a four-week consultation period, closing on 18 June 2019, before releasing updated guidelines for deposit-taking institutions.

    For more information about REIWA's advocacy efforts, visit our advocacy page.