Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
subscribe to our newsletter
subscribe to our newsletter

Banks continue revising mortgage serviceability policies

Three more lenders have announced cuts to their interest rate floors for home loan serviceability assessments in response to APRA’s new guidance.

Bendigo and Adelaide Bank, the Bank of Sydney and Auswide Bank have made changes to their mortgage serviceability assessment policies.

The changes come in response to the Australian Prudential Regulation Authority’s (APRA) changes to its home lending guidance, in which it scrapped the 7 per cent interest rate floor for mortgage assessments and increased the buffer rate to 2.5 per cent.

Advertisement
Advertisement

Bendigo and Adelaide Bank has cut its interest rate floor from 7.35 per cent to 5.75 per cent and increased its buffer from 2.25 per cent to 2.5 per cent.

The changes are effective for all new residential home loan applications from Thursday, 25 July.  

In a statement to Mortgage Business, the bank said: “The interest rate buffer will apply to all new residential mortgage loan applications including further advances/lending and any existing principal and interest loan where the buffer is applied to the loan amount.

“The floor interest rate will also apply to all new residential mortgage loan applications, including further advances/lending, and as a proxy for existing interest-only residential mortgage loans and line of credits when assessing consumer loan serviceability.

“As a prudent and responsible lender, the decision strongly considers changes in the market and the economic environments.”  

The Bank of Sydney has reduced its floor rate to 5.85 per cent and kept its buffer at 2.5 per cent, effective immediately for new home loan applications.

Further, Auswide will reduce the serviceability floor rate on its residential home loans from 7 per cent to 5.75 per cent and increase its interest rate buffer from 2.25 per cent to 2.5 per cent.  

Auswide’s new serviceability floor rate has been applied to applications that are currently in the workflow pipeline but not yet formally approved. However, applications that have been formally approved prior to 22 July will retain the former serviceability assessment rates.

“This change is the latest in a series of recent credit policy changes introduced as a direct result of a broker consultation program designed to examine the broker journey with Auswide Bank,” Auswide stated.

Bendigo and Adelaide Bank, Bank of Sydney, and Auswide Bank are the latest lenders to amend their serviceability policies, joining the likes of ANZ, Westpac, the Commonwealth Bank, Macquarie, Suncorp and MyState Bank.  

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: CBA amends home lending policy]

 

Banks continue revising mortgage serviceability policies
Bendigo and Adelaide Bank, the Bank of Sydney, and Auswide Bank
mortgagebusiness

Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

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

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

Latest News

A major insurance provider has announced that it would restrict its offering of lender’s mortgage insurance in light of emerging risks ass...

Lenders will be allowed to extend their pre-approval period for borrowers using the First Home Loan Deposit Scheme given the coronavirus pan...

The federal government has announced several changes to the Takeovers Panel, which include the reappointment of an ANZ executive and the ap...

FROM THE WEB
podcast

LATEST PODCAST: Further relief for SMEs and borrowers

Do you expect COVID-19 to reduce or increase your business flows?

Why we’ll keep delivering for our communities in the face of COVID-19

alex

As Australia tries to keep pace with a rapidly changing business and social landscape in the wake of COVID-19, Momentum Media is leading the way delivering essential content to our communities, writes Alex Whitlock, director of Mortgage Business.

Read more

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.