{"id":21798,"date":"2019-05-29T14:02:03","date_gmt":"2019-05-29T04:02:03","guid":{"rendered":"https:\/\/timesnewsgroup.com.au\/ballarat\/?p=21798"},"modified":"2019-05-30T08:42:43","modified_gmt":"2019-05-29T22:42:43","slug":"apra-move-means-extra-borrowing-power","status":"publish","type":"post","link":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/","title":{"rendered":"APRA move means extra borrowing power"},"content":{"rendered":"<p><strong>APRA\u2019S scrapping of the 7 per cent\u00a0<\/strong><strong>\u2018stress test\u2019 buffer on home loans\u00a0<\/strong><strong>will effectively see a 9 per cent\u00a0<\/strong><strong>increase in borrowing capacity for\u00a0<\/strong><strong>owner-occupiers which will rise\u00a0<\/strong><strong>to between 13 and 14 per cent if the\u00a0<\/strong><strong>RBA undertakes two interest rate\u00a0<\/strong><strong>cuts before the year is out, according\u00a0<\/strong><strong>to RiskWise Property Research.<\/strong><\/p>\n<p>CEO Doron Peleg said that with the current ultra-low interest rate and two interest rate cuts projected by the RBA, APRA\u2019s 7 per cent \u2018stress test\u2019 was a major barrier for borrowers in an already highly regulated and scrutinised lending environment.<\/p>\n<p>APRA\u2019s introduced a 7 per cent \u2018floor assessment\u2019 to the ADIs in December 2014. Mr Peleg said while at that time this instruction to the ADIs was required, this conservative approach could not be applied to the lending landscape of 2019.<\/p>\n<p>\u201cIn 2014, there was a tangible risk that in the foreseeable future interest rates might increase materially,\u201d Mr Peleg said.<\/p>\n<p>\u201cFurther, a high proportion (44 per cent) of the loans were interest-only and 12 per cent of the loans had LVR of 90 per cent.<\/p>\n<p>\u201cThat, alongside loose controls over the accuracy of the information provided by prospective borrowers in loan applications and reliance on the HEM to assess household expenses, provided justification for APRA\u2019s instruction.\u201d<\/p>\n<p>He said the banks also applied a slightly higher rate of 7.25 per cent to ensure they were above the minimum threshold.<\/p>\n<p>However, Mr Peleg said since then the lending environment had completely changed and APRA\u2019s requirement had become ultra-conservative.<\/p>\n<p>\u201cInterest rates are now very low with a very high likelihood of additional cuts by the RBA, and no signs of increases in the foreseeable future,\u201d he said.<\/p>\n<p>\u201cA low interest rate environment has, effectively, become the \u2018new normal\u2019 in Australia. Loan applications are heavily scrutinised, lenders are applying more conservative credit policies, the proportion of interest-only loans is now low with only 16 per cent of the new loans (December 2018) being interest-only and 7 per cent of loans at 90 per cent.\u201d<\/p>\n<p>RiskWise undertook a case study of a scenario involving a married couple, who both receive average weekly earnings at their full-time jobs, and have two children.<\/p>\n<p>The couple require a loan of 30 years and their only expenses are either HEM or HEM X 1.5, and the assumption is they have no credit card repayments and other expenses.<\/p>\n<p>\u201cOur analysis showed that due to the scrutinising of loan applications and by applying the effective 7.25 per cent \u2018stress test\u2019 this materially reduced their borrowing capacity by 33 per cent,\u201d Mr Peleg said.<\/p>\n<p>\u201cThe borrowing capacity of $698,000, based on the HEM and \u2018floor assessment\u2019 of 7.25 per cent, is equivalent to HEM X 1.5, with an interest rate of 2.87 per cent.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>APRA\u2019S scrapping of the 7 per cent\u00a0\u2018stress test\u2019 buffer on home loans\u00a0will effectively see a 9 per cent\u00a0increase in borrowing capacity for\u00a0owner-occupiers which will rise\u00a0to between 13 and 14 per cent if the\u00a0RBA undertakes two interest rate\u00a0cuts before the year is out, according\u00a0to RiskWise Property Research. CEO Doron Peleg said that with the current ultra-low [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":129,"featured_media":21799,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[29],"tags":[],"post_folder":[],"class_list":["post-21798","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>APRA move means extra borrowing power - Ballarat Times<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"APRA move means extra borrowing power - Ballarat Times\" \/>\n<meta property=\"og:description\" content=\"APRA\u2019S scrapping of the 7 per cent\u00a0\u2018stress test\u2019 buffer on home loans\u00a0will effectively see a 9 per cent\u00a0increase in borrowing capacity for\u00a0owner-occupiers which will rise\u00a0to between 13 and 14 per cent if the\u00a0RBA undertakes two interest rate\u00a0cuts before the year is out, according\u00a0to RiskWise Property Research. 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CEO Doron Peleg said that with the current ultra-low [...]Read More...","og_url":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/","og_site_name":"Ballarat Times","article_published_time":"2019-05-29T04:02:03+00:00","article_modified_time":"2019-05-29T22:42:43+00:00","og_image":[{"width":440,"height":352,"url":"https:\/\/static.timesnewsgroup.com.au\/prod\/uploads\/sites\/9\/2019\/05\/Untitled-124.png","type":"image\/png"}],"author":"The Ballarat Times","twitter_card":"summary_large_image","twitter_misc":{"Written by":"The Ballarat Times","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/#article","isPartOf":{"@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/"},"author":{"name":"The Ballarat Times","@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/#\/schema\/person\/4301f908d92f821f2752c965ef566687"},"headline":"APRA move means extra borrowing power","datePublished":"2019-05-29T04:02:03+00:00","dateModified":"2019-05-29T22:42:43+00:00","mainEntityOfPage":{"@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/"},"wordCount":444,"publisher":{"@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/#organization"},"image":{"@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/#primaryimage"},"thumbnailUrl":"https:\/\/static.timesnewsgroup.com.au\/prod\/uploads\/sites\/9\/2019\/05\/Untitled-124.png","articleSection":["Real Estate"],"inLanguage":"en-AU"},{"@type":"WebPage","@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/","url":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/","name":"APRA move means extra borrowing power - Ballarat Times","isPartOf":{"@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/#website"},"primaryImageOfPage":{"@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/#primaryimage"},"image":{"@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/#primaryimage"},"thumbnailUrl":"https:\/\/static.timesnewsgroup.com.au\/prod\/uploads\/sites\/9\/2019\/05\/Untitled-124.png","datePublished":"2019-05-29T04:02:03+00:00","dateModified":"2019-05-29T22:42:43+00:00","breadcrumb":{"@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/#breadcrumb"},"inLanguage":"en-AU","potentialAction":[{"@type":"ReadAction","target":["https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/"]}]},{"@type":"ImageObject","inLanguage":"en-AU","@id":"https:\/\/timesnewsgroup.com.au\/ballarat\/real-estate\/apra-move-means-extra-borrowing-power\/#primaryimage","url":"https:\/\/static.timesnewsgroup.com.au\/prod\/uploads\/sites\/9\/2019\/05\/Untitled-124.png","contentUrl":"https:\/\/static.timesnewsgroup.com.au\/prod\/uploads\/sites\/9\/2019\/05\/Untitled-124.png","width":440,"height":352,"caption":"RiskWise CEO Doron Peleg said that if the stress test was reduced or removed it would improve borrowing capacity. 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