Regulator targets people’s borrowing capacity

Australia’s banking regulator, APRA, has introduced new lending rules that will reduce the maximum amount some people can borrow.

When you apply for a mortgage, lenders are required to assess your ability to repay the loan not on the actual interest rate, but on the interest rate plus a buffer.

Previously, the buffer was a minimum of 2.50 percentage points; now, APRA has told lenders to increase it to 3.00 percentage points. So if you applied for a loan with an interest rate of 2.09%, lenders would have to assess whether you could repay the loan if the rate increased to at least 5.09%.

APRA expects this change will reduce the average person’s borrowing capacity by about 5%.

However, each person’s situation is unique. Some borrowers may not experience any reduction in their borrowing capacity. Others might experience a larger impact.

In this new home loan environment, it’s never been more important to get help from an expert broker who’s fully across the new rules. As your broker, I can:

• Maximise your borrowing capacity so you can buy your dream home
• Show you how your borrowing capacity can change from lender to lender
• Compare dozens of lenders and hundreds of loans for you