You may have heard recently that  the Australian Prudential Regulation Authority (APRA) has decided to increase the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.

By November borrowing power could drop for a typical borrower by around 5%

APRA will now expect banks to use a 3.0% serviceability buffer on top of their lending rate to assess loan repayment ability. E.g. although your interest rate might be 2.49%, you would be assessed on your ability to repay the loan at 5.49%.



The increase in the interest rate buffer applies to all new borrowers.

The impact of a higher serviceability buffer is likely to be larger for investors rather than owner-occupiers. This is because, on average, investors tend to borrow at higher levels of leverage and may have other existing debts (to which the buffer would also be applied).

On the other hand, first home buyers also are likely to also be affected as the share of first home buyers pushed to the max of their borrowing ability due to their income as well as they tend to also be more constrained by the size of their deposit.

We encourage anyone looking for finance to talk to us and find out how these changes could affect you 📞