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