EASING REQUIREMENTS TO HELP APPLICATIONS

With cost-of-living pressures and higher interest rates really starting to have an impact on the economy, banks have made it easier for some borrowers to refinance their home loans by relaxing conditions that enable people to qualify for finance.

The banking watchdog, the Australian Prudential Regulation Authority (APRA), has expected lenders to add three percentage points to new and refinanced loans from their current level. That means a new customer offered a 6.0 per cent variable interest rate would be assessed to see if they can still repay the loan at 9.0 per cent.

Many borrowers who took out loans in recent years have been struggling to qualify for new loans with better rates due to these strict serviceability standards imposed by APRA.

But we have seen some lenders come to the party by allowing existing mortgage holders to refinance their loans at a reduced buffer of one per cent.

The Commonwealth Bank of Australia (CBA) is among the lenders to make these changes to serviceability requirements, although the deal has only been extended to mortgage holders with a good repayment history. People who bought properties under bility schemes or have poor repayment histories are excluded.

To be eligible for the reduced refinancing offer, borrowers must meet certain criteria, including having a loan that has been open for 12 months or more, a loan-to-value ratio better than 80 per cent, and no delinquency of payments