APRA lending changes, simplified!
Posted on: 24 Jul 2019

APRA lending changes, simplified!

Catherine Mapusua-

Operations Manager, Inception Wealth Group

Let's break down what the APRA lending changes mean for you!


What do the new APRA standards mean for home owners?

With recent changes to lending standards made by the Australian Prudential Regulation Authority, commonly know as APRA, you could be eligible to borrow more or obtain a much lower rate on your current home loan.

Previously banks were required to apply a “stress test” to see if customers could afford to repay home loans at a rate of at least 7 percent. However, with the new changes now in effect the only stipulation in effect is a buffer of 2.5% above the agreed rate.

With most variable rates now close to 3% this means that most borrowers will be assessed at a rate below 6% per annum and for many Inception Finance customers this serviceability floor is sub 5.5% in comparison to the 7% required, prior to the ruling.

So, What does this mean for borrowers?

The change relaxes serviceability requirements, allowing for extra borrowing capacity. For example, a simple projection based on a family with a household income of $100,000 would now be able to borrow up to an additional $100-175,000 if assessed at 5.5% instead of 7.25% according to in-house team. Dependant on their circumstances.

The outlook suggests further good news to come, with most leading economists tipping the cash rate to fall as low as 0.75%, meaning the increases in borrowing capacity could grow substantially larger.

If you want to review your current loan structures then, contact us today!