Westpac has moved its interest rate floor to 5.75%, down from 7.25%, in response to APRA changes to how banks can assess mortgage borrowers. This follows moves from ANZ, which has changed its interest rate floor to 5.5% from 7.25%.
These moves from the major lenders follow changes to the banking regulator’s guidelines. APRA previously set interest rate floors, dictating that banks had to assess borrowers’ ability to repay loans on a 7.25% interest rate, but is now permitting the lenders to self-assess.
These changes to loan serviceability guidelines, combined with APRA lifting its restrictions on interest-only lending earlier this year, will make finance easier to access for Australian investors than it has been in previous years.
ANZ Banking Group was the first lender to pass on the benefit of the loosened lending limits that are tipped to greatly increase purchasing power for home-buyers.
An ANZ spokesman said APRA’s decision was sensible in the current low rate environment and the new rates would give more Australians the opportunity to buy a home or refinance their loans.