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CBA amends home lending policy

CBA amends home lending policy

The major bank has lowered its interest rate floor for mortgage serviceability assessments, becoming the third major bank to amend its policy following changes to APRA’s regulatory guidance.

The Commonwealth Bank of Australia (CBA) has lowered its interest rate floor for home loan serviceability assessments from 7.25 per cent to 5.75 per cent and increased its buffer to 2.5 per cent.

CBA’s changes will be effective for all new home loan applications form Monday, 22 July.  

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The big four bank is the latest lender to adjust its serviceability policy after the Australian Prudential Regulation Authority (APRA) changed its home lending guidance, scrapping the 7 per cent interest rate floor for mortgage assessments and increasing the buffer rate to 2.5 per cent.

In a statement to Mortgage Business, CBA’s executive general manager of home buying, Dan Huggins, said: “We welcomed APRA’s decision to update its guidance relating to serviceability assessment rates.

“Following a review of our serviceability rates based on APRA’s new guidance, our portfolio and our risk appetite, from Monday, 22 July we will introduce a new 5.75 per cent floor rate and 2.5 per cent interest rate buffer.

“In considering and delivering these changes, we have ensured we continue to meet our regulatory commitments and drive great customer outcomes whilst also delivering a timely and consistent service.”

CBA joins the likes of ANZ, Westpac, Macquarie , Suncorp and MyState, all of which adjusted their credit policies in response to APRA’s amendments.

ANZ has slashed its interest rate floor from 7.25 per cent to 5.5 per cent (effective from 15 July), while Westpac Group – which includes its subsidiaries Bank of Melbourne, BankSA and St George Bank – has lowered its floor from 7.25 per cent to 5.75 per cent (effective from 16 July).  

Meanwhile, Macquarie and Suncorp have undercut the majors, slashing their interest rate floors to 5.3 per cent and 5.5 per cent, respectively.

MyState, however, has adopted a more conservative approach in its response to the regulatory changes, lowering its interest rate floor to 6.2 per cent, effective from Monday, 15 July.

All the aforementioned lenders also increased their buffers to 2.5 per cent, in line with APRA’s guidance.  

Other lenders are expected to follow suit, with NAB and AMP informing Mortgage Business that they’re currently in the process of reviewing their assessment rates.

Non-bank lender Resimac, which, along with the rest of the non-bank sector, is not formally bound by APRA’s guidance, has also confirmed that it is reviewing its policy.

[Related: Non-majors lower rate floors, undercut majors]

 

 

CBA amends home lending policy
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Charbel Kadib

Charbel Kadib is a journalist on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Charbel graduated from the University of Notre Dame Australia with a Bachelor of Arts (Politics & Journalism).

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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