Savings

APRA president says future remains cloudy for home loans

With housing loans currently accounting for more than 60% of the banking sector’s total loan portfolio, the prudential regulator has warned of tough times ahead due to rising inflation and interest rates.

Addressing the Financial Review Banking Summit, APRA Chairman Wayne Byres said wWe are now entering a very different environment from what has existed for much of the past decade.

“Historically, housing loan portfolios have been low risk and have acted as ballast for the industry during turbulent times,” Mr. Byres said.

“That may not be the trend going forward, as total dollar losses from housing portfolios now routinely exceed other portfolios in our stress tests.

“This is why APRA has been increasingly exercised (and, at times, interventionist) in recent years on the quality of housing loans, and why our proposed new macroprudential framework emphasizes measures to limit housing risks.

In October last year, APRA increased the service cushion from 2.50% to 3.00%, which is expected to reduce the average borrower’s borrowing power by 5%.

Rising inflation and rising mortgage rates have helped do some of the work for APRA, with Byres noting that the faster-than-expected emergence of higher inflation and higher interest rates will have a significant impact on many mortgage borrowers with probable pockets of stress.

This is especially the case if interest rates continue to rise rapidly and, as expected, house prices fall.

“Of particular note are residential mortgage borrowers who have benefited from very low fixed rates over the past two years and could face a significant ‘repayment shock’ – possibly compounded by negative equity – when they will need to refinance next year. or two, he said.

For example, Commonwealth Bank has $89 billion in fixed home loans expiring in 2023.

APRA intends to keep tabs on the experience of borrowers who have borrowed at high multiples of their income, as the cohort has grown significantly over the past year due to historically low interest rates.

The regulator notes that this growth has not been an industry-wide development, but has instead been concentrated in just a few banks.

“We expect that changes in lending policy at these banks, coupled with rising interest rates, will see the high level of DTI borrowing begin to moderate over the coming period,” he said. .

ANZ and NAB tighten debt-to-income caps

ANZ has changed its debt-to-income ratio (DTI), revealing from June 6 that it will no longer accept new mortgage applications from borrowers whose total debt is more than seven and a half times their income, against nine times.

Addressing the Financial Review Banking Summit, ANZ head of retail banking, Maile Carnegie, said ANZ’s reduction in the DTI cap was partly a response to APRA’s tightening standards.

Alongside ANZ, NAB has also taken action after recently reducing its debt-to-income ratio limit from nine to eight times.

APRA considers a DTI of more than six times to be high.

Investor loans rise as homeownership growth slows

RBA data released on Tuesday shows annualized growth in homeownership credit for April has returned to November 2021 levels.

It stands at 9.0% for homeowners, while growth in investment loans reached 5.8%, the highest level since January 2016.

Read more: Mortgage rates at pre-pandemic levels as average home loan size soars


Are you buying a house or looking to refinance? The table below shows home loans with some of the lowest interest rates on the market for homeowners.



Lender


Variable More details
UNLIMITED WITHDRAWALSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable – 2 years (LVR
  • Fast turnaround times, can meet 30 day settlement
  • For purchase and refinancing, down payment min 20%
  • No ongoing or monthly fees, add 0.10% compensation

Variable More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees – None!
  • Unlimited additional refunds
  • Easy online application, quickly find out if you are approved!
  • Redraw – Access your extra payments if you need them
  • Use the app for loan information to help you pay off your home loan faster

Careful variable real estate loan (capital and interest) (LVR
  • No ongoing fees – None!
  • Unlimited additional refunds
  • Easy online application, quickly find out if you are approved!
  • Redraw – Access your extra payments if you need them
  • Use the app for loan information to help you pay off your home loan faster

Variable More details
100% COMPLETE CLEARING ACCOUNTNO APPLICATION FEES OR ON-GOING FEES

Low Rate Home Loan – Premium (Principal & Interest) (Owner Occupant) (LVR
  • No upfront or ongoing fees
  • 100% cleared account
  • Additional refunds + withdrawal services

Variable More details
NSW/VIC/SA METRO AND INLAND REGIONAL AREAS$5000 REBATE. T&Cs APPLY.

Variable real estate loan (capital and interest)

  • No upfront or ongoing fees
  • 100% cleared account
  • Additional refunds + withdrawal services


Basic criteria: a loan amount of $400,000, variable, fixed, principal and interest (P&I) real estate loans with an LVR (loan-to-value) ratio of at least 80%. However, the “Compare mortgages” table allows calculations to be made on the variables selected and entered by the user. All products will list the LVR with the product and price list which is clearly published on the product supplier’s website. Monthly repayments, once the basic criteria are modified by the user, will be based on the advertised prices of the selected products and determined by the loan amount, repayment type, loan term and LVR as entered by the user. user/you. *The comparison rate is based on a loan of $150,000 over 25 years. Please note: this comparison rate is only true for this example and may not include all fees and charges. Different terms, fees or other loan amounts may result in a different comparison rate. Rates correct as of May 31, 2022. See disclaimer.


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