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APRA curbs: Who loses? As more borrowers take out high debt-to-income loans, regulators are stepping in to cool the housing market – but many in the industry are warning of unintended consequences THERE ARE fears that some borrowers may be locked out of the housing market as a result of APRA’s recent changes to the minimum interest rate buffer. The regulator stepped in in response to rising house prices and high levels of borrower debt. Banks are now expected to assess a borrower’s ability to service a loan from 3% above the loan product rate, up from 2.5%. House prices have risen more than 18% over the last year, with some cities and regional areas seeing even larger jumps. Part of the reason for this price growth has been record-low interest rates, which are making larger loans more affordable. Twenty-two per cent of new home buyers are now borrowing more than six times their income, up from 16% of buyers a year ago. In making the announcement, APRA chair Wayne Byres said the action had been taken to ensure that banks were lending to borrowers who could afford the level of debt they were taking on, “both today and into the future”. Byres said it was expected that housing credit growth would run ahead of household income growth in the period ahead, and while the economy was expected to bounce back as lockdowns were lifted across the country, the balance of risks warranted stronger serviceability standards. APRA expects that the increased loan serviceability buffer will reduce maximum borrowing capacity for the typical borrower by around 5%.
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In its analysis, ratecity.com.au said a household that under the old rules could borrow a maximum of $500,000 would see their borrowing capacity fall to $475,000 – a drop of $25,000. Research director Sally Tindall said many borrowers didn’t borrow at full capacity, but anyone planning to do so would need to reassess their budget. “These new changes will clip the wings of people borrowing at their capacity,” she said. Although the changes were designed to protect people from taking on risky levels of debt, she warned they would hurt first home buyers who typically had smaller incomes and deposits.
country. The interest rate buffer increase has been implemented nationwide, but Ward said the need to cool the housing bubble was a “capital city issue”. In fact, Ward said housing affordability
“This change will be a hard pill for some borrowers to swallow; however, it will ultimately protect them from overstretching themselves” Sally Tindall, ratecity.com.au “This change will be a hard pill for some borrowers to swallow; however, it will ultimately protect them from overstretching themselves, and that’s a good thing.” Accusing APRA of completely disregarding regional Australia, Cairns mortgage broker Roger Ward said the change could spell disaster for regional economies around the
was very good in places like Cairns, where you could still buy a property for $400,000, which meant that single-income families could enter the market. “With all the concerns the Reserve Bank and APRA have about market velocity and housing affordability, this simply does not apply to most of regional Australia,” he said.
www.mpamagazine.com.au
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