The mortgage insurer has updated its serviceability calculator to reflect a lower interest rate floor.
LMI provider Genworth Mortgage Insurance has reduced its interest rate floor for home loan serviceability assessments from 5.75 per cent to 5.4 per cent, effective from 11 November.
Genworth’s revision comes less than a week after the Commonwealth Bank of Australia (CBA) announced that it would also lower its rate floor from 5.75 per cent to 5.4 per cent.
Genworth and CBA have joined Auwside Bank, Heritage Bank and Westpac in revising their serviceability rates twice in response to the Australian Prudential Regulation Authority’s (APRA) changes to its home lending guidance.
In early July, the prudential regulator scrapped its requirement for a 7 per cent interest rate floor and raised its recommended buffer rate from a minimum of 2 per cent to 2.5 per cent.
APRA chair Wayne Byres said the regulator’s amendments were “appropriately calibrated”, stating that a serviceability floor of more than 7 per cent was “higher than necessary for ADIs to maintain sound lending standards”.
Analysts have partly attributed the rebound in home lending activity over the past few months to APRA’s changes.
According to new data released by the Australian Bureau of Statistics, the value of new home lending commitments rose 1.1 per cent (in seasonally adjusted terms) in September, following on from a 3.8 per cent rise in August.
New lending commitments are now up 5.6 per cent (seasonally adjusted) when compared with September 2018, the first positive year-on-year result seen since mid-2018.
[Related: Auswide slashes floor rate]
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