APRA move means more home loan borrowing



The Australian Prudential Regulation Authority’s (APRA’s) scrapping of the seven per cent ‘stress test’ buffer on home loans will effectively see a nine per cent increase in borrowing capacity for owner-occupiers, according to RiskWise Property Research.
This would rise to between 13-14 per cent if the Reserve Bank of Australia (RBA) undertakes two interest rate cuts before the year is out.
With the stress test reduced or removed, it would mean if the interest rate for owner-occupiers was about 3.75 per cent, they would pay about 6.25 per cent which would create a nine per cent borrowing capacity.
Doron Peleg, RiskWise chief executive, said with the current ultra-low interest rate and two interest rate cuts projected by the RBA, APRA’s stress test was a major barrier for borrowers in an already tough market.
“If there are no interest rate cuts the increase in borrowing capacity will be an increase of around four-to-five per cent for investors and for owner-occupiers about nine per cent,” Peleg said.
“However, if the RBA cut rates twice, we will see an increase of around nine per cent for investors and potentially 13-14 per cent for owner-occupiers.
“This will be a major boost to the market, especially as now the number one risk has been removed thanks to a Coalition win and the elimination of the threat of taxation changes to negative gearing and capital gains tax.”
Recommended for you
AZ NGA has entered into a strategic partnership with national advice firm MiQ Private Wealth, as a way to provide a succession solution, as well as career development opportunities for staff.
While the advice profession struggles under growing operating costs, Adviser Ratings has found more than half of practices – some 58 per cent – that generate less than $250,000 in revenue report no profit at all.
The Federal Court has ordered the freezing of assets and the appointment of receivers to two entities linked to Australian Fiduciaries, ASIC’s latest move in an ongoing investigation into the company’s managed investment schemes.
Off the back of the August adviser exam results, the profession has seen 17 new entrants hit the Financial Adviser Register (FAR) this week, helping numbers return to positive territory.