Many of our lenders have announced their new serviceability rates now that APRA has removed the 7 per cent interest rate floor.

Previously, many lenders ensured borrowers could service their loan at a rate of 7.25 per cent, as a safeguard against future rate rises.

However, the low interest rate environment has seen APRA change the rules, and lenders now only need to assess a customer’s ability to make repayments at a rate 2.5 per cent above the loan’s existing rate.

These changes are a welcome move according to the Mortgage and Finance Association of Australia (MFAA) and are more appropriate given the current interest rate forecast.

What does this mean for borrowers?
If you are considering taking out a new loan or refinancing an existing loan, these changes are likely to affect your borrowing capacity. In some cases, you may be able to borrow more than you could have previously.

Of course, even if you can borrow more, it doesn’t necessarily mean you should. You need to be comfortable with your repayments, and ensure they are in line with your budget and lifestyle. Remember that while rates are low at the moment, it is inevitable that they will rise at some point during your loan term.

Nevertheless, now is a great time to have a chat with us about your borrowing needs and future plans. We can help you determine if the serviceability changes could open up any opportunities for you.