NAB is the last of the Big Four banks to lower its interest rate floor in response to the banking regulator APRA relaxing its guidelines for loan serviceability. This will make it easier for consumers to borrow to buy real estate and will allow many applicants to borrow more.
NAB has lowered its interest rate floor to 5.5% and increased its interest rate buffer to 2.5%, effective for all new home loan applications from 5 August. This means it has matched ANZ’s rate floor of 5.5% and undercut CBA and Westpac, which both dropped their interest floor rates to 5.75%.
“Now is the right time to change the approach to how the affordability rate floor is determined, given the continuing low-interest rate environment,” says NAB’s chief customer officer of consumer banking Mike Baird.
The Commonwealth Bank has relaxed its mortgage lending rules starting July 22. CBA, the country’s biggest lender, says it will introduce a new 5.75% floor rate and 2.50% interest rate buffer, in line with the APRA’s instructions. CBA’s rates are currently at 7.25% and 2.25%, respectively.