Non-majors lower rate floors, undercut majors

Macquarie Bank has made changes to its home loan serviceability assessment policy, reducing its interest rate floor from 7.25 per cent to 5.3 per cent and increasing its buffer from 2.25 per cent to 2.5 per cent.

Macquarie’s revisions are effective for new home loan applications from today (17 July).

Suncorp Bank has also revealed to Mortgage Business that it will be cutting its interest rate floor from 7.25 per cent to 5.5 per cent and increasing its buffer from 2.25 per cent to 2.5 per cent.

In a statement, a Suncorp spokesperson said: “This change will deliver positive benefits for customers wanting to enter the property market.

“As always, we encourage aspirational home owners to do their homework, ask questions of their broker or bank and have a clear understanding of what they can afford to repay each month.”

The changes have come off the back of the Australian Prudential Regulation Authority’s (APRA) changes to its home lending guidance.

Earlier this month, the prudential regulator finalised its proposal to scrap the 7 per cent interest rate floor for mortgage assessments and increase the buffer rate to 2.5 per cent.

Macquarie and Suncorp are the latest lenders to revise their credit policies in response to APRA’s new guidance, with ANZ and Westpac Group also reducing their floors.

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).  

Both ANZ and Westpac also increased their interest rate buffers from 2.25 per cent to 2.5 per cent.

Other lenders are expected to follow suit, with the Commonwealth Bank of Australia, 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.

In a statement to Mortgage Business, a Resimac spokesperson said: “Whilst the APRA guidance with respect to residential mortgage lending is specifically directed at ADIs, as a prudent and responsible lender, Resimac consistently adopts the guidelines as set down by our regulator ASIC with respect to responsible lending conduct. These guidelines (RG 209) provide similar detailed guidance as those provided by APRA (under APG 223).

“Resimac currently has a serviceability floor rate of 7.25 per cent that works in conjunction with a 2 per cent buffer. However, in light of the recent guidance update provided by APRA, we will be reviewing our position with respect to loan serviceability to ensure we adopt a long-term approach that takes into consideration the changes in the market and economic environment.”