Tweet
Borrowers face tougher mortgage test
LENDERS are making it harder for people to borrow for homes by lifting the size of rate rises customers must show they can handle.
Research by Australia's largest independent broker Mortgage Choice revealed that in early 2009, when borrowing costs hit 60-year lows, lenders were applying rate-rise stress tests that ranged from 0.75 per cent to 1.5 per cent.
It is now 1.5 per cent to 2.5 per cent - despite a string of official increases returning borrowing costs to normal levels.
In 2009 home hunters had to prove they could deal with an increase in repayments of $190 to $380 a month, based on the then average NSW home loan - $391,000.
With today's bigger buffer and higher average mortgage of $452,000, a borrower has to show they have as much as $800 a month extra.
"Any increase in the assessment rate will take some people out of the market," Mortgage Choice corporate affairs manager Kristy Sheppard said yesterday.
This, Ms Sheppard said, was evident in the Australian Bureau of Statistics' housing finance figures, which had been declining for the past seven months.
Mortgage Choice's research also found some lenders had cut from 100 per cent to 50 per cent the proportion of overtime earnings they would take into consideration when assessing the ability to repay.
Nurses, police and other emergency service workers were exempt.
Demonstrating how sensitive the topic is, all five major banks were unwilling to say publicly what their buffer was.
However, a Westpac spokeswoman said its "buffers do vary from time to time reflecting economic conditions, but our approach is at the tighter end of the market and we are comfortable with our position".
The interest rate futures market do not reflect lenders' increased caution about the future cost of borrowing.
As of yesterday, the ASX's interest rate tracker, which is based on futures market trading, was forecasting rates would rise by only 0.5 percentage points over the next 18 months.
- By John Rolfe
- From: The Daily Telegraph
- June 25, 2010 12:00AM
LENDERS are making it harder for people to borrow for homes by lifting the size of rate rises customers must show they can handle.
Research by Australia's largest independent broker Mortgage Choice revealed that in early 2009, when borrowing costs hit 60-year lows, lenders were applying rate-rise stress tests that ranged from 0.75 per cent to 1.5 per cent.
It is now 1.5 per cent to 2.5 per cent - despite a string of official increases returning borrowing costs to normal levels.
In 2009 home hunters had to prove they could deal with an increase in repayments of $190 to $380 a month, based on the then average NSW home loan - $391,000.
With today's bigger buffer and higher average mortgage of $452,000, a borrower has to show they have as much as $800 a month extra.
"Any increase in the assessment rate will take some people out of the market," Mortgage Choice corporate affairs manager Kristy Sheppard said yesterday.
This, Ms Sheppard said, was evident in the Australian Bureau of Statistics' housing finance figures, which had been declining for the past seven months.
Mortgage Choice's research also found some lenders had cut from 100 per cent to 50 per cent the proportion of overtime earnings they would take into consideration when assessing the ability to repay.
Nurses, police and other emergency service workers were exempt.
Demonstrating how sensitive the topic is, all five major banks were unwilling to say publicly what their buffer was.
However, a Westpac spokeswoman said its "buffers do vary from time to time reflecting economic conditions, but our approach is at the tighter end of the market and we are comfortable with our position".
The interest rate futures market do not reflect lenders' increased caution about the future cost of borrowing.
As of yesterday, the ASX's interest rate tracker, which is based on futures market trading, was forecasting rates would rise by only 0.5 percentage points over the next 18 months.
Comment