Money: Home loan borrowing capacity to be boosted as APRA scraps rule - - PressFrom - Australia
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MoneyHome loan borrowing capacity to be boosted as APRA scraps rule

05:50  05 july  2019
05:50  05 july  2019 Source:   smh.com.au

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APRA said that instead of that interest rate "floor," it would require banks to test if customers could manage repayments with rates at least 2.5 percentage As a result, a customer's borrowing capacity could increase by about 10 per cent or more, analysts have estimated. RateCity estimated that if a

Home loans . Customers set to be able to borrow more as APRA moves to scrap key mortgage rule . “The changes, while likely to increase the maximum borrowing capacity for a given borrower , are not intended to signify any lessening in the importance that APRA places on the maintenance of.

Home loan borrowing capacity to be boosted as APRA scraps rule© Louie Douvis APRA chair Wayne Byres said the previous interest rate floor was higher than needed.

A key constraint on borrowing limits that was put in place during the property boom has been removed by the banking regulator, in another move that may stimulate the soggy mortgage market.

The Australian Prudential Regulation Authority (APRA) on Friday confirmed it would scrap a rule that has meant all new mortgage customers are assessed on their ability to manage repayments with 7.25 per cent interest rates.

APRA said on Friday that instead of the interest rate "floor," it would require banks to test if customers could manage repayments with rates at least 2.5 percentage points higher than a loan's current rate.

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Customers set to be able to borrow more as APRA moves to scrap key mortgage rule . Customers taking out a new home loan would be able to borrow tens of thousands of dollars more, under a proposal from the banking regulator to unwind a key constraint that was put on lenders during the

Home loan borrowing capacity to be boosted as APRA scraps rule . APRA moves to scrap key mortgage rule of 7% interest rate test. APRA has suggested banks change the way they assess customers ’ ability to meet their mortgage repayments in a move the prudential regulator says would

The decision, which is effective immediately, is in line with APRA's proposed changes, which it floated in May.

With many mortgages currently attracting interest rates of about 3.5 per cent, the change will mean banks will need to test whether borrowers can afford their loan at a rate of 6 per cent, instead of 7.25 per cent. As a result, a customers' borrowing capacity could increase by about 10 per cent or more, analysts have estimated.

Home loan borrowing capacity to be boosted as APRA scraps rule© Peter Rae The change is set to boost the already-stabilising Sydney and Melbourne property markets.

The change, which has strong support from banks, is seen by experts as one reason behind the recent signs of stabilisation in Sydney and Melbourne's property markets, alongside the election result and the back-to-back interest rate cuts.

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APRA forces NAB, Westpac, ANZ to hold extra 0m each in capital due to culture, governance concerns: Time for Australia to give itself some governance aid The change could see new mortgage customers' borrowing capacity increase by about 10 per cent or more, analysts have estimated.

Home loan borrowing capacity to be boosted as APRA scraps rule . The experienced team at RPS Financial Services would welcome the opportunity to review and compare your current home loan against other lenders in the market.

APRA chairman Wayne Byres said the previous interest rate "floor" was higher than needed, while also saying the previous policy had been complicated by the fact banks charge so many different interest rates, according to the type of loan.

“In the prevailing environment, a serviceability floor of more than seven per cent is higher than necessary for ADIs [authorised deposit-taking institutions] to maintain sound lending standards," Mr Byres said.

"Additionally, the widespread use of differential pricing for different types of loans has challenged the merit of a uniform interest rate floor across all mortgage products,” Mr Byres said.

Mr Byres said the changes were not intended to signal the regulator would be putting less emphasis on sound lending standards by banks.

More to come

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APRA forces NAB, Westpac, ANZ to hold extra $500m each in capital due to culture, governance concerns.
The financial regulator will force NAB, Westpac and ANZ Bank to each hold an extra $500 million in capital due to problems with their governance and culture. The Australian Prudential Regulation Authority (APRA) on Thursday said it was slapping on the extra capital requirement in response to the bank's "self-assessments" of how they managed "non-financial risks." The banks were ordered to carry out the assessments after a similar exercise at scandal-plagued  Commonwealth Bank saw it get hit with a $1 billion capital charge last year.

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