Recently APRA (Australian Prudential Regulation Authority) has removed rules for the banks about how they calculate borrowing power. This was introduced during the period where the property prices were increasing as a way of restricting borrowing power. As a result of this review, borrowing power has increased by as much as 15 per cent.
Who are the winners?
Home buyers have seen their borrowing power increase by up to 12%.
Investors can now borrow 15% or more.
Mortgage prisoners who are people unable to refinance due to lending restrictions are now far more likely to be able to refinance. These people may have entered into loans under previous lending arrangements and found themselves stuck due to the introduction of the minimum assessment rate increasing to 7.25%.
Refinancing is now easier and there are more lenders who can help. Please call us on 1300 473 347 or enquire online if you’d like to compare your options.
How much more can I borrow?
A home buyer
A single borrower with an annual gross income of $90,000 with no other ongoing liability and low living expenses used to be able to borrow up to $557,920 when the banks used an assessment rate of 7.25%.
Now, the same borrower may have an assessment rate of 5.89%, which allows them to borrow up to $617,000.
That’s an increase of roughly 10.59% in their borrowing power.
As an investor, you would now have the new rules applied to all your existing lending meaning that the assessment rate for all your loans will reduce increasing your borrowing power or even now allowing you the ability to extend interest only terms on your investment lending.
Everyone is different
The borrowing power calculation will be different for everyone as it’s a complex calculation. Most borrowers will see their borrowing power increase significantly and those who have several mortgages, most likely investors, will see the biggest increase in their borrowing power.