The REIQ said that, currently, APRA requires lenders to assess a borrower’s serviceability at 7 per cent (some lenders use 7.25 per cent), or 2 per cent above the borrower’s rate, whichever is higher, as a buffer for rising mortgage interest rate risk.
It said that pressure has been mounting recently, with experts and commentators suggesting 7 per cent was unreasonably high, as actual mortgage rates continued to fall.
REIQ CEO Antonia Mercorella said this could mean a significant difference for many buyers.
“We know that buyers are trying to get into the market but have been falling short of the 7 per cent or 7.25 per cent serviceability rate set by APRA and enforced by lenders,” she said.
“The consistent feedback we have received from our agents is that there has been a rising number of contracts falling over at the finance stage, and we know this is largely down to serviceability assessments.
“This is a wise and prudent move from APRA and the real estate industry welcomes this sensible, measured approach.”
Ms Mercorella said the REIQ supports this approach.
“Banks will continue to assess risk appropriately and responsibly. This measure will simply free lenders up to lend responsibly to more borrowers who are keen to use property to build their personal wealth,” she said.
“In the post-inquiry climate, the perception in the community is that it’s very difficult to borrow for a property. This proposed change will give lenders an opportunity to reassess lending assessment criteria and, potentially, give more loans.
“Just as the real estate market benefits from greater confidence, so too does the finance sector, and it’s crucial that banks work to rebuild that trust.”