APRA recently announced its intention to have lenders remove the 7.25% floor they use for servicing calculations. In a letter to the lenders, APRA state that they plan to remove the servicing floor and allowing lenders to assess on actual repayments plus a buffer, which will allow many people to borrow more. This will loosen the the tightening credit situation in Australia.
What does it really mean?
If you have recently been knocked back on a loan because you were unable to service the loan amount then there is a chance that you will be able to qualify for a loan once this comes into effect. Loans are currently assessed at around 7.25%, meaning that the lender will assess your ability to repay the loan should rates go up to 7.25%. This will be moving to the actual rate +2.5%, so if your home loan rate is around 3.6% then the new assessment rate will be approximately 6.1%. The new assessment rates will have a big impact on borrowing capacity.
Update Aug-2019: This is now in place with lenders.
One thing to note is that it won't help you with your deposit. If you were unable to get a loan because of a lack of deposit then, unfortunately, you need to keep saving.
Contact us and let's see what might be possible under the new system.