You Can Now Borrow More After APRA’s Change:

APRA’s decision to remove the 7 per cent floor on home loan serviceability assessments will help take the brakes off Australia’s home loan credit crunch. Previously, APRA made banks check whether home loan applicants could pay their mortgage at a rate of at least 7 per cent. Most banks applied a minimum rate of 7.25 per cent. From last Friday, banks can set their own serviceability minimums, provided they also apply a 2.5 per cent buffer on the current interest rate when assessing an application.

For many Australians the move is likely to significantly boost their borrowing power by tens of thousands of dollars. RateCity.com.au analysis shows a family on an average household income of $109,688 would be able to borrow up to around $60,000 more if their loan was assessed at 6.25 per cent instead of 7.25 per cent. The average single person would be able to borrow up to around $50,000 more under the same scenario.