In the three weeks since APRA confirmed it no longer expects lenders to assess home loan applications using a minimum interest rate of at least 7%, lenders have adjusted their floor rates down to varying degrees.
The majority of banks that have already adjusted their serviceability rates have lowered it from 7.25% to one of two figures: 5.50% or 5.75%.
As of 25 July, the rates are as follows:
Adelaide Bank 5.75%
Bluebay Home Loans 5.75%
Auswide Bank 5.75%
The notable outliers thus far are Macquarie, which adjusted its floor rate to 5.30%, and the Bank of Sydney, with a new floor rate of 5.85%.
Each lender has also either retained or shifted its interest rate buffer to 2.50%, as per APRA’s new guidelines.
The amended serviceability assessments will allow borrowing capacities to move back towards the higher levels evidenced before APRA took steps to slow the market several years ago.
While there are various groups poised to benefit from the changed guidelines – first home buyers generally believed to be among them – others have expressed doubt regarding the depth and breadth of the impact likely to be felt, as limited borrowing capacities are not only a result of the servicing rate, but also depend on household expenditure measures (HEM) among other factors.
According to CoreLogic research analyst Cameron Kusher, the changes are “unlikely to result in a rebound in the housing market.”
“Historically, before 2014 for example, the buffer for serviceability was 2%. So the 2.5% is still significantly larger than the buffer that was around before the macro prudential changes came into place,” he noted.