The Big Loan Change Coming Next Week (And How You Could Avoid It) Daily Liberal

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New lending standards imposed by the prudential regulator mean that it could be more difficult for some home hunters to qualify for a home loan on November 1, although an expert says there are still ways around them. changes. The Australian Prudential Regulatory Authority (APRA) announced earlier this month that it would increase the cushion test it applies to see if borrowers can handle future interest rate hikes of 2.5% to 3%. This means that a borrower who applies for a home loan today at a 2% rate will have their application examined to determine if they can still make the repayments at an interest rate of 5%. The changes are expected to reduce a person’s borrowing capacity by about 5%, if their lender is subject to the new rules. “That would mean that if you had already been approved for a loan of $ 800,000, it would now be $ 760,000,” said Sarah Megginson, senior mortgage writer on comparison site Finder. “$ 40,000 less is a big difference in this market,” she added. APRA has announced that the changes are expected to implement the changes from November 1, although it is understood that many banks have already tightened their borrowing tests following the announcement. “Fixed rate loans have increased over the past few months and it also reflects those changes – when fixed rates rise, your lending power changes,” Ms. Megginson said. Home hunters with existing pre-approvals may be able to avoid the changes, but for those planning to take out a loan in November, the changes don’t necessarily mean they’ll be forced to cut their budget. “The important thing to understand is that, for now, this applies to banks and not to non-bank lenders,” Ms. Megginson said. “A non-bank lender, he often does everything a bank does, he can provide all types of credit, but it is not a bank. It is a financial institution, a credit union or a building society. … They are governed by slightly different rules. APRA’s new rules apply to Authorized Depository Institutions or ADIs, while non-bank lenders are still subject to the existing 2.5% buffer. outside the traditional “big four” banks might help a borrower get the right loan, but it also pays to remember that each lender will assess loan applications differently, Ms. Megginson said. “For example, some credit unions may be friendlier to independent borrowers, “she said.” Depending on your situation, what these changes really remind us of is that it’s worth shopping around, “she added. personal debts There were other relatively simple things potential borrowers could do to improve the odds of their mortgage being approved, or to increase the amount they can borrow. This included closing unnecessary credit accounts, such as credit cards. “Another thing people don’t realize is that your personal debt is reducing your lending capacity, even if you don’t use your credit limit,” she said. “If you delete that credit card account or lower the borrowing limit, your borrowing power will increase dramatically,” she said.

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