Regulator targets people’s borrowing capacity
Australia’s banking regulator, APRA, has introduced new lending rules that will reduce the maximum amount some people can borrow.
When you apply for a mortgage, lenders are required to assess your ability to repay the loan at the actual interest rate plus a interest rate buffer.
Previously, the buffer rate was a minimum of 2.50% but now, APRA has mandated lenders to increase this to 3%. So if you apply for a loan with a nominal interest rate of 2.14%, lenders will assess your loan affordability at an interest rate of at least 5.14% – most lenders assess at higher rates.
APRA expects this change will reduce the average person’s borrowing capacity by about 5% and help to cool property prices.
However, each person’s situation is unique. Some borrowers may not notice a major reduction in their borrowing capacity, whereas others may be significantly impacted.
In this new home loan environment, it’s never been more important to seek the assistance of experienced finance professionals who are fully across the new rules and can help you to:
- Assess your total borrowing capacity
- Maximise your borrowing power against multiple lenders
- Compare 100s of home loans to help you save
Call us for a chat about your borrowing capacity.
Property investors enjoys strong rental growth
According to Domain, house rents have climbed strongly in many parts of Australia and unit markets have enjoyed strong growth in selected areas.
Over the year to September, capital city house rents increased by an average of 5.5% and 6 capital cities experienced double-digit growth.
During the same period, capital city unit rents decreased by an average of 2.1%, although rents actually increased in 6 capitals.
Rents are rising in many parts of Australia due to an undersupply of rental properties; this has led to increased tenant demand for the limited amount of accommodation.
In Perth, Adelaide, Hobart, Canberra and Darwin, the vacancy rate (the share of untenanted rental properties) is under 1.0%, according to SQM Research, which is incredibly low. In Brisbane, the vacancy rate is also low at 1.4%.
Conversely, rental growth in Sydney and Melbourne is weaker, with vacancy rates above 2.5%.
This is a good time to be a property investor, as rents are rising, prices are rising and vacancy rates are falling in many parts of the country. Conditions are favouring landlords and those looking to enter the market.
Chat with us if you’d like to purchase an investment property
Shopping on a pay-later scheme can affect your home loan chances
The use of buy-now-pay-later services has surged in recent years, more than doubling between 2018 and 2021, according to Roy Morgan. Meanwhile, credit cards are also being heavy used by many Australians.
While both buy-now-pay-later services (BNPLS) and credit cards have many pros, some may not realise the negative impact these credits services may have on one’s home loan borrowing power.
If you regularly use BNPLS and hold multiple credit cards with high limits, your borrowing capacity will be significantly affected.
To help maximise your borrowing power, you could:
- Reduce or cancel your BNPL services
- Lower or cancel your credit card limits
- Ensure payments for all credit facilities are paid on time… every time.
Contact us if you would like to maximise your borrowing capacity
Cafes and Gyms feel the pain but mining and manufacturing spared
New data from the Australian Bureau of Statistics has revealed the winners and losers from the widespread lockdowns that occurred in July and August.
Accommodation & food services suffered the biggest fall, with the industry experiencing a 16.6% month-on-month decline in turnover in July and then another 6.5% decline in August.
Construction (-2.9% and -0.1%) and other services (-2.2% and -5.5%) were the only other industries to experience turnover declines in both July and August.
Conversely, the mining sector increased its turnover by 4.6% in July and 0.1% in August.
Manufacturing (1.2% and 0.9%) and wholesale trade (0.6% and 1.0%) also expanded in both months.
Kind Regards,
Sal Cinque | CEO
03 9886 0800 | loans@tagfinancial.com.au
Disclaimer: The information contained on this page is general in nature. Professional advice should be sought before acting on any aspect on this page. TAG Finance and Loans Pty Ltd ABN 25 609 906 863 Credit Representative Number 483873 National Mortgage Brokers Pty Ltd ABN 88 093 874 376 Australian Credit License 391209.