Three non-major brands have adjusted their serviceability assessments for residential lending, following APRA revising its guidelines to allow each ADI to assess and set its own minimum interest rate floor earlier this month.
Effective today, St. George, BankSA and Bank of Melbourne have each decreased their floor rate from 7.25% to 5.75%.
Each also increased its buffer rate from 2.25% to 2.50%, in accordance with APRA’s amended guidance.
Applications that have yet to be formally approved will fall under the jurisdiction of the new floor, buffer and benchmark rate.
Conversely, any application formally approved before today, 16 July, will retain the existing benchmark rates, unless it is reset.
When APRA announced the change in policy in early July, chair Wayne Byres noted that the former serviceability floor of 7% was not only “higher than necessary for ADIs to maintain sound lending standards,” but also that a uniform rate floor across all mortgage products no longer made sense in the current lending environment.
FBAA managing director Peter White agreed in a statement released yesterday.
He explained, “As brokers, it makes it more difficult to get approval and creates immense disappointment and confusion for clients if banks use outdated data to assess the suitability of average Australians to pay off their home.”
Currently, just two of the big four Australian banks have issued their own response. Westpac, like the three non-majors, also amended its serviceability floor rate from 7.25% to 5.75%, whereas ANZ lowered its floor rate further, down to 5.50%.
White congratulated ANZ and Westpac for moving to a “more reasonable assessment position,” while urging the other two majors to follow suit as soon as possible.
Meanwhile, CoreLogic national auction market commentator, Kevin Brogan said, "...The banks are looking very closely at household expenditure. Although the serviceability buffer has moderated, I don’t think we’re going to see runaway access to borrowing."