Several leading brokers have suggested that APRA’s recent changes to home loan serviceability guidelines will result in more opportunities for the market.
In July, the Australian Prudential Regulation Authority (APRA) revised its mortgage serviceability guidelines, which saw the previous 7 per cent interest floor removed, and the interest rate buffer revised to 2.5 per cent.
When The Adviser asked brokers about their thoughts on the serviceability change, the sentiment was overwhelmingly one of impending opportunity, particularly for first home buyers and low- to medium-income earners.
“Opportunity now presents itself for low- to medium-income earners who have previously been outside of the housing market either due to purchase price or serviceability – particularly in regional areas,” said Belinda Gibson, director of Thomas Magdalene Finance Group.
“We will see buyers enter the market or those wanting to purchase an investment property,” Ms Gibson said.
Louisa Sanghera, managing director of Zippy Financial Group, said that APRA’s serviceability changes will help “open up” greater finance options to a wider range of buyers, “from first home buyers through to growing families, downgraders and even investors”.
“We’re starting to see some lenders reignite their appetite for investors, with interest rates starting to come down on interest-only loans in particular,” Ms Sanghera said.
“The average person’s borrowing power has increased substantially with the recent rate cuts and APRA changes.
“This is a great opportunity for those who were struggling to get what they wanted to revisit their borrowing power, and there are some terrific deals out there for them now, too,” she concluded.
Adam Donald, mortgage broker from Capita Finance, shared a similar sentiment, saying he is “optimistic” the changes will be beneficial in getting first home buyers back into the market.
“Throughout the country, there has been great difficulty for home buyers to enter the market, and these changes will allow potential buyers to borrow more money to purchase their dream home, rather than settling for something less, due to the high assessment rates,” he said.
Mr Donald went on to say that serviceability changes will likely have a “flow-on effect” into the property market and help stimulate price growth.
“More borrowing capacity will have a flow-on effect, allowing buyers to borrow more, which will stimulate the market, especially now with the election over and Liberal staying in power with their policy of maintaining negative gearing,” he said.
“These factors, with the combination of low interest rates, make it a great time to enter the market.”
Similarly, Daniel Green, founder and director of commercial finance brokerage Green Finance Group, also viewed the revised serviceability guidelines as a stimulant to the property market.
“I think it is fair to say that many potential borrowers have been in a holding pattern, just waiting to see what happens,” Mr Green said.
“The potential for increased borrowing capacity, coupled with low rates, has injected positivity back into the market.
“Clients are proactively looking at their options around refinance and repurchase, and that’s a plus for the housing market, and broader economy activity in the resi space is definitely heating up.”
Additionally, Mr Green said the previous serviceability criteria was no longer “realistic”, making APRA’s changes more than appropriate.
“The gap between the standardised floor rate and actual interest rates paid had become so wide that in some cases, it simply wasn’t realistic,” Mr Green said.
Ms Gibson agreed, saying the nature of the previous assessment criteria was “excessive”.
“In some circumstances, the previous assessment rates were more than double what customers were paying on their actual rate,” Ms Gibson said.
“We are in a low interest rate and low-income growth environment; my personal viewpoint is that this is a positive change and a fairer assessment in terms of responsible lending practices and borrowing capacity.”