The Australian Prudential Regulation Authority (APRA) has conducted its final hearings for the inquiry into the financial regulatory framework and home ownership on 24th October 2024. In its remarks, APRA stood by the 3% serviceability buffer, claiming it is crucial for stability. However, It seems many disagree.

“The serviceability buffer currently sits at 3%, and exists to ensure that banks lend to borrowers able to repay their loans in a range of scenarios. The buffer provides an important contingency for a range of economic shocks – not only for rises in interest rates – over the life of the loan. It also factors in unforeseen changes in a borrower’s income or expenses which we have seen play out recently as cost-of-living pressures mount,”

Recently, lenders have reviewed their serviceability models and have increased their Household Monthly Expenses (HEM’s) to reflect increases in the cost of living. The increase has impacted on clients borrowing capacity, decreasing their potential loan amount.

Whilst media hype is centred around low home loan rates and “shopping around for the best deal”, borrowers are advised to discuss the best suited loan product for their needs. The loan percentage may be the key to acquiring a competitive rate.

A recent mortgage industry study revealed that finance/mortgage brokers now account for just under 80% of all home loans submitted to lenders. Two major banks have expressed that they would focus on their own lending channels (i.e branches and mobile lenders) to improve shareholder returns. Also, they invest more into simple home loan platforms which would deliver faster decisions for customers.

As your finance broker, Paul will analyse your ability to meet the various lender’s serviceability criteria.

Give Paul a call today to discuss how your situation may be worthwhile reviewing.

 

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