ANZ boss Shayne Elliott says it’s time for a rethink of APRA’s 7.25% home serviceability restriction rate.
The banks are now feeling the pinch from APRAs serviceability restrictions that say borrowers must be able to handle a 7.25% repayment interest rate and are campaigning for it be relaxed. “I think common sense says it should be relative to where the interest rate cycle is,” Elliott says. “The lower interest rates get the less likely it is that rates are going to get to 7.25% any time soon.”
He also notes that ANZ went too far in scrutinising its new loans under stricter interpretations of responsible lending standards. It is now loosening its approach.
Mortgage broker Louise Lucas of The Property Education Company says the 7.25% benchmark is “ridiculous” given that most borrowers are getting interest rates below 4%.
“There’s so much fat in the system it’s insane,” Lucas says. “If we thought interest rates were going to reach 7% in a hurry it might be reasonable but that’s not happening for a long, long time. Rates are trending lower, not higher, so the current buffer is unreasonable.”