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APRA’s home loan rule relaxation will allow for bigger mortgages

Posted by admin on 05/07/2019
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Australian Prudential Regulation Authority (APRA) have just announced a change to the way banks are required to assess home loan applications, which is likely to increase the borrowing capacity of many Australian home buyers.

Effective immediately, lenders are no longer required to use the minimum interest rate of 7 per cent to assess a buyer’s borrowing capacity, when checking whether they can afford their monthly repayments. Under the new guidelines banks will set their own floor, provided they allow a 2.5 per cent buffer on the current interest rate as part of their serviceability calculations.

According to a RateCity.com.au analysis; a family on an average household income of $109,688 would be able to borrow up to around $60,000* more if their loan was assessed at 6.25 per cent instead of the previous standard 7.25 per cent.

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