The Australian Prudential Regulation Authority (APRA) has released new policy that toughens the rules on bank lending.
In a key change, APRA is now being more specific in demanding minimum interest rates banks must use when approving customers for home loans, investment loans and business loans.
What does this mean to you?
No matter how low interest rates may fall, the banks are to make sure new borrowers can repay their debts with interest rates at 7 per cent rather than the lower current rate, new guidelines have confirmed.
After recent signs of a resurgent property market in Sydney and Melbourne, the regulator also locked in various policies that it hopes will make sure banks are realistic in assessing borrowers’ ability to repay their loans.
It also said banks should make sure a potential customer would still be able to repay their loan if interest rates rose 2 percentage points – previously it had not specified how big such a buffer should be.
Other areas, like living allowances, bonuses and allowance, have all changed in recent times to ensure borrowers can repy their loans when interest rates increase.
Does this make it harder to borrow?
Banks already satisfy many of these guidelines after a crackdown over the last two years. But APRA aims to make sure the lending standards are not eroded away in the future by competition, as has occurred in the past.
So it is harder to borrow and these rules have been in-place for a while now. You need to make sure you get the right advice from your Broker or Bank when you are planning to borrow.
How can we help you?
At Craig Tracey Lending we give you experienced advice to make sure you can afford your home loan, investment loan or business loan. This will help you stay on top of your finances in the future so you don’t have to worry.
Click here to find out how we do this for you: What we do