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Citi joins peers in lowering serviceability floor rate

by Tas Bindi4 minute read
Citibank

Citi is the latest lender to amend its credit policy in response to APRA’s revised home lending guidance. 

Citi has announced that it has reduced its serviceability floor rate from 7.1 per cent to 5.4 per cent* and increased its interest rate buffer from 2.1 per cent p.a. to 2.5 per cent p.a. above the offered rate for all mortgage applications. 

Effective immediately, the changes are in response to APRA’s decision to allow authorised deposit-taking institutions (ADIs) to review and set their own minimum interest rate floor for use in serviceability assessments and utilise a revised interest rate buffer of at least 2.5 per cent over the loan’s interest rate.

Other lenders that have updated their serviceability floor rate and interest rate buffers include: ME Bank, Heritage Bank, ANZ, Westpac, the Commonwealth Bank, NAB, Macquarie, Suncorp, MyState Bank, Bendigo and Adelaide Bank, the Bank of Sydney, Auswide Bank, Teachers Mutual Bank, Advantedge and Bankwest

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In late July, Citi had also informed brokers that it replaced the use of the Henderson Poverty Index benchmark with the new Household Expenditure Measure to determine whether the expenses reported by loan applicants are reasonable. 

The non-major bank made another update to its credit policy, requiring gross rental income to be discounted by the higher of: investment property expenses declared in living expenses (including body corporate, building insurance, utilities and land tax) or 15 per cent of gross rent. The annualised amount are now to be placed in the “total declared property expenses” section of Citi’s manual serviceability calculator, which was revised to accommodate the policy changes. 

Citi also recently announced plans to expand its commercial footprint in Australia by offering mid-sized companies – operating in Australia and overseas – with access to its full suite of banking products and services. Alex Syhanath, head of Citi Commercial Bank Australia, claimed at the time of the launch that the new strategy would boost efficiency and lower costs for the bank’s clients.

*The story has been updated to reflect that Citi's new floor rate is 5.4 per cent, not 5.25 per cent (as initially reported). 

[Related: Citi changes expense verification method]

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Tas Bindi

Tas Bindi

AUTHOR

Tas Bindi is the features editor for The Adviser magazine. 

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