Money Your Budget Home loans may get easier to access as regulator has rethink
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Home loans may get easier to access as regulator has rethink

APRA to ease lending
The tighter restrictions have put the brakes on the property market. Photo: AAP
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Borrowers trying to buy property may have an easier route, with news that the Australian financial regulator may loosen the restrictions placed on banks when approving loans to customers.

The Australian Prudential Regulation Authority could remove the requirement that banks and lenders use the figure of 7 per cent when assessing people’s ability to repay their loans.

Instead, APRA has recommended that lenders use a 2.5 per cent buffer on top of the interest rate offered to the client.

The development comes only a week after ANZ chief executive Shayne Elliott urged APRA to rethink the mortgage credit lending rate.

ANZ boss said it was time to consider changing the buffer requiring new borrowers to have the capacity to pay a 7 per cent interest rate.

The current measure that banks apply is the benchmark mortgage rate plus 2.25 per cent or 7 per cent, whichever is higher.

“We had a floor like this before the APRA requirement, it’s prudent … I’m just saying I think common sense says it should be relative to where the interest rate cycle is,” Mr Elliott said at the release of the bank’s half-year results earlier this month.

“The lower interest rates get, the less likely it is that rates are going to get to 7.25 per cent any time soon.

“At some point, you need to rethink it … common sense says it should be relative to where the interest rate cycle is.”

APRA chairman Wayne Byers said historically and persistently low interest rates had left the 7 per cent mark unnecessarily high, while the gap between owner-occupier and investor rates meant a single rate was no longer as appropriate.

The tighter criteria are widely acknowledged as having put a brake on the market.

The March housing finance figures showed a seasonally adjusted drop in home lending of 18.4 per cent year on year.

Nationally, lending for investment dwellings also dropped, down by 25.9 per cent since March 2018, the lowest level since March 2011, the ABS data showed. 

As the Reserve Bank of Australia considers one rate cut, probably two, in 2019, there has been mounting pressure to loosen the buffers established by APRA five years ago.

-More to come

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