Bank regulator APRA has relaxed lending standards, and it could be your opportunity to buy the home you’ve always wanted.
This is exciting news. It’s just become easier for Aussies to secure a home loan, and it could even be the cue to ramp up your home buying plans.
Why it could be easier to get a home loan today
When you apply for a home loan, lenders don’t just look at your deposit or income. They also check out how well you could manage your loan repayments if interest rates were to rise.
It’s called a ‘stress test’, and it makes sense. After all, interest rates are at record lows right now, but you need to be able to handle your loan repayments if rates were to rise.
The thing is, until recently, bank regulator APRA, had set some pretty tough rules for this stress test.
Lenders were expected to assess home loan applications using a minimum interest rate of 7%. In practice, most lenders were using a rate of 7.25%.
That’s a lot higher than current home loan rates. With a selection of loans now having rates well below 4% and some now even starting with a 2, APRA’s stress test wasn’t reflecting market conditions.
And that’s why the lending rules have just wound down several notches.
Banks are now free to set their own ‘stress test’ rate as long as it’s 2.5% higher than the loan’s actual rate.
What does it mean for you?
This is where the good news really kicks in.
APRA’s scrapping of the 7% buffer could mean you’re eligible for a home loan a lot sooner than you expected.
The lower stress test could also boost your borrowing power. In fact, it has the potential to give your home buying budget an uptick worth tens of thousands of dollars, providing you can still comfortably afford the repayments.
Just how much extra you may be able to borrow depends on your circumstances. The main point though is that it could mean being able to upgrade your home buying plans from, say, an apartment to a house, to buy in a better suburb or even refinance a home loan to a better deal with another lender.
If you want to know how these changes help you, speak with your local Aussie Broker. It could be the big break you’ve been waiting for.
You may also be interested in What does the RBA rate cut mean for me?, What you could spend when buying in Australia’s most affordable suburbs and Why now is a good time to check back in with your broker