The Australian Prudential Regulation Authority (APRA) have relaxed their mortgage assessment guidelines, making it exceptionally easier for first home buyers to secure a home loan.
APRA was established by the Australian Government in 1998 and oversees the activity of different institutions across banking, insurance and superannuation. They aim to maintain order to promote a stable financial system in Australia.
APRA was established by the Australian Government in 1998 and oversees the activity of different institutions across banking, insurance and superannuation. They aim to maintain the safety of these institutions and promote a stable financial system.
The recent changes will affect how lenders will assess a customer’s ability to meet mortgage repayments. Previously, lenders, such as banks, would evaluate a home buyer’s borrowing capacity based on a minimum interest rate buffer of 7 per cent. Banks can set their own interest rates based on the new minimum interest rate buffer of a little 2.5 per cent.
Experts say that these changes have increased peoples borrowing capacity resulting in more people taking out mortgages and purchasing property. In particular, first time home buyers should take advantage of these changes as they are given a greater opportunity to enter into the market.
Aside from APRA’s changes, the Australian Government will be introducing a First Home Loan Deposit Scheme in January 2020. The scheme will be available to first home buyers earning an income of up to $125,000 or couples with a maximum combined income of $200,000. Buyers will only need a 5% deposit instead of the standard 20% deposit and will save around $10,000 in lenders mortgage insurance.
APRA’s removal of the 7 per cent interest rate and the introduction of the First Home Loan Deposit Scheme is optimistic for first time home buyers. However, the scheme is limited to 10,000 first homebuyers so if you are interested in purchasing your first home, take advantage of these changes and contact the team here at Kydon Segal Lawyers and we will happy to be of assistance!