Home lending poised to change, how you can get the best deals



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With increased borrowing capacity on the horizon thanks in part to APRA recommendations for loan assessments, it’s a good time to check if you’re getting the best deal possible for your dollar.

Buying a home can be an exciting journey, but it’s one that also can be fraught with problems, with finance often being a complicated and thoroughly confusing time.

Even coming to grips with the level of education that’s seemingly needed to purchase can confuse the most ardent of buyers, especially as they come to grips with the idea that their savings may not buy them quite the level of home they’ve come to expect.

While a housing downturn can improve prospects for would-be home shoppers, loan assessments can sour them once again, especially with a lender requirement to use a minimum of 7 per cent to judge whether repayments to loans can be met. That’s a minimum of 7 per cent used by lenders on borrowers to gauge whether a repayment schedule can be met, even if the serviced interest rate is often much, much lower.

However, with news this week that the Australian Prudential Regulation Authority (APRA) has proposed changes to the 7 per cent minimum, home loan applicants may soon have more borrowing power within their grasp.

Instead of the 7 per cent minimum — of which the big four banks presently use a minimum of 7.25 per cent — APRA is proposing to allow lenders to assess home loans at their actual interest rate plus 2.5 per cent. 

What the home loan lending buffer change means for you

If agreed to and delivered, a reduction in the home loan interest floor would likely improve borrowing power for home loan applicants and borrowers, as they would not necessarily be assessed at quite so high a rate.

Once a drop is agreed to, new loans would likely be assessed at a lower interest rate, which means new loans or refinancing could see changes industry-wide.

How to make the most out of your dollar and get the best home loan

With a change to the interest rate floor seemingly on the cards, the chances of getting the best home loan possible are set to improve greatly, and within reach of more Australians looking to buy.

A change in assessment rates should improve borrowing power, which makes it prudent for borrowers to find a lender that matches their needs best, a sentiment shared between some of Australia’s independent lenders.

“This is a huge win for borrowers,” said Athena CEO Nathan Walsh, adding that “APRA’s rule change will unlock the mortgage handcuffs that prevent many borrowers from switching to a better value home loan”.

“The savings potential from switching from typical big bank rates can be tens of thousands of dollars over the life of the loan,” he said.

Fortunately for Australians looking to buy, the range of home loans can be more easily researched and scrutinised. RateCity’s Big 4 check system makes it easy to see a direct comparison with how much borrowers could potentially save over the cost of a loan against what Australia’s major banks are offering.

Products from lenders are available for easy and quick comparisons, with lenders ranging from Athena to UBank, making it a practical A to Z, or at least A to U in this example. Practically any lender can be compared, helping to push potential savings to all and improve borrowing capacity considerably.

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