How the recent finance changes can help you get into your own home sooner

1 August 2019

Exciting news for home buyers in Western Australia! There have been major changes in the finance world recently. While interest rate drops have positively helped decrease loan repayments for home owners, there have also been some exciting changes that in effect increase the borrowing capacity of consumers.

 

Interest Rate Drop

The Reserve Bank of Australia has dropped interest rates to a historic low of 1%. Major lenders such as NAB, ANZ and CBA have followed suit by announcing their rate decreases.

 

With the latest release we saw the below rate reductions:

  • NAB – 0.19%
  • CBA – 0.19% (owner occupied) 0.25% (interest only)
  • Westpac – 20% (owner occupied) 0.30% (interest only)
  • ANZ – 0.25%
  • Macquarie – 0.20%
  • ING – 0.20%
  • ME – 0.15%
  • Keystart – 0.21%

 

A great example of the impact this has on consumers is Westpac’s 2 year fixed loan which used to be 3.79% and is now 3.18%. Based on this example, a $400,000 loan over a 30 year period – the saving would be $1,632 per annum.

On the same example, the savings would be $1,188 per annum when comparing Keystart‘s old interest rate of 5.34% to the current rate of 4.94%.

 

Increased Borrowing Capacity

New banking policy passed by APRA (Australian Prudential Regulation Authority) on assessment rates has resulted in increased borrowing capacity for consumers.

Earlier this month, APRA announced that they would be lessening the interest rate floor and alternatively utilise a revised interest rate buffer of at least 2.5% over the loan’s interest rate.

So, what is the assessment rate? This is the altered interest rate that lenders use to assess the consumer’s borrowing capacity instead of the current interest rate. Essentially this is the buffer used to account for any future interest rate increases.

Prior to now, the APRA imposed assessment rate was 7% which saw most lenders adopt 7.25%. While this was a positive covenant as it protects the consumer, it could have resulted in declination for your loan in the past. Since APRA’s announcement several banks have revised their policies and passed on a reduced floor and new rate buffer in line with the recommendations.

For example, a single applicant with no debt, earning $80,000pa could previously borrow $404,826 on the old assessment rate. That same applicant can now borrow $439,458 on the flexi first 5 year intro with an introductory rate of 3.48% and an assessment rate of 6.08%.

 

The impact of these changes is both significant and exciting for those looking to purchase their own home, further adding to the popular opinion that now is a great time buy!

 

How can Now Living Realty help?

We’re proud to work alongside both The Loan Company* and Keystart^ in assisting Western Australians get into their own homes sooner and cannot wait to help you on your very own journey.

To find out more information, contact us today. One of our sales representatives will then pass you onto an accredited finance professional at The Loan Company to help you with your finance journey.

 

*Finance provide by Harrisdale Pty Ltd trading as The Loan Company ABN 59 088 462 140 Australian Credit Licence Number 386355.
^Keystart Loans Ltd Australian Credit Licence 381437. Now Living Realty provides Keystart with referrals, who is the provider of credit assistance. Now Living Realty does not receive any benefits from this relationship.