A major constraint on borrowing limits has been removed by the banking regulator APRA, allowing real estate buyers to borrow more. Comparison website RateCity suggests a household on an average income could borrow up to $77,000 extra, while an average full-time worker could borrow $66,000 more.
APRA has officially confirmed what was revealed in May – that it would scrap a rule introduced in 2014, which meant borrowers were assessed on a 7.25% interest rate. APRA will now require banks to test if customers can manage repayments with rates 2.5 percentage points above a loan’s current rate. Mortgage broker Louise Lucas of The Property Education Company says lender MyState has published a new assessment rate of 6.2%, while Westpac and St George will now assess at 6.5%.
“This is enormously helpful for anyone trying to get a loan,” Lucas says. “It will make a profound difference because loans will be assessed a lot more easily. It’s an awesome change.” UBS economist Carlos Cacho says households on an income of $200,000 a year could boost their loans by an extra $150,000 to $1.25 million if they gained a leading market interest rate.