More good needs for prospective home buyers!
EFFECTIVE IMMEDIATELY, banks no longer need to apply a “stress test” to see whether potential home buyers can afford a 7% interest rate on their residential home loan repayments. That is well over double the current interest rates.
The APRA (Australian Prudential Regulation Authority) has implemented new standards that allow banks the freedom to set their own serviceability buffers. Banks will just have to ensure borrowers can repay their loans if interest rates were 2.5% points higher than they are currently.
The RBA cut the cash rate again this week to a record low 1%- the second rate cut in just two months.
Record low cash rate of 1% coupled with APRA's rule changes will allow people to borrow MORE.
Borrowers will still need to show the same checks on assets and liabilities as normal- proof of income, responsible spending and saving, outstanding personal loans, payment defaults, etc.
So what does that mean to the bottom line?
A Family that earns a combined household income of $109,688, would be able to borrow up to $60,000 MORE when their home loan was assessed at 6.25% serviceability instead of 7.25%.
A single person in the same situation would be able to borrow $50,000 more.