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Some great news for those seeking to obtain finance this week.  Independent financial regulator APRA has recommended to the banks that they ease their assessment rates in order to help the contracted lending market.

This is very good news for everyone who has a home loan and it is without a doubt going to help first home buyers get into the property market. I am very happy to hear of this policy, especially after the ongoing restrictions over the past few years.

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What is an assessment rate?

Firstly you might be asking yourself, what exactly is an assessment rate?

This is the rate that the bank stress tests your loan. It is important to have an assessment rate, but in my honest opinion, I do believe that they sit too high for today’s current lending environment. Where in some cases, your assessment rate is more than double the actual rate!

Prior to 2014, the assessment rate was approximately 1.5% above your home loan. So, if your rate was 4%, it would be assessed at 5.5%.

APRA enforced that the minimum rate for a loan to be assessed would be 7% … in fact most banks adopted at least 7.25%. This resulted in borrowing capacities being dropped by over $100,000 in many cases. This was the start of the tightening of credit and was designed to reduce the property boom (which didn’t work due to a surge of foreign investment cash buyers …. but that’s another story for another blog post!)

What has now been proposed by APRA is that we adopt the previous model, where we add a buffer to the rate – the recommendation is set to be 2.5% above the home loan rate.

What does this mean?

Let’s take the Bank of Sydney as an example. They are one of our smaller lenders that we like to use here at Pink Finance. They currently have a home loan rate of 3.55%* (comparison rate 3.57%). Currently, the bank assesses this at 7.30%. – a whopping 3.75% above the actual home loan rate. If they adopted APRA’s proposal, this assessment rate would drop down to 6.05%.

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How does this impact borrowing capacity?

I recently assessed a First Home Buyers Borrowing Capacity. They are vigorously saving and have a household income of $110,000. Their borrowing capacity is currently $559,000. For this example, the reduction of the assessment rate could increase their borrowing power to $628,000.

For a first home buyer who had $100,000 in savings, this would mean your purchase price could increase from $655,000 to $712,000.

This is awesome news for those wanting to purchase a property or increase their borrowings for renovations. However,  it is equally beneficial for those who may have been wanting to refinance their home loan and consolidate debts. This has been much harder to do over the last year or so, but this new policy being introduced by APRA, will assist those to refinance and reduce the likelihood of their refinance loan being knocked back.

Now it is a matter of when the banks will introduce this policy? Personally, I don’t think it will be too long…

Good news overall for the housing industry and the Australian public!

*Rates are subject to change and was correct as at Wednesday 22nd May.

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CUSTOMER TESTIMONIALS

  • As a first home buyer, Nicole & her team took the stress out of what can be an overwhelming experience. She was incredibly thorough, knowledgable & efficient. I would recommend her to anyone seeking financial services!

  • Thank you so much to Nicole and the team for my recent loan refinance. The professionalism, communication and efficiency from start to finish throughout the process was exceptional. The customers’ needs are always their top priority and it’s great to have extra money in your pocket each month! I have no hesitation in recommending Pink Finance amazing services and know many others that say the same.

  • So grateful for Nicole and her team. They were so amazing from the start to end. We were able to change our loan and start achieving our goals thanks to the exceptional service from Pink Finance. Always so accommodating. Best broker we have ever dealt with. Thank you.

  • It was our pleasure dealing with Nicole Cannon when we decided to refinance our home loan. Her professionalism and knowledge made the process a lot easier. Her dedication and prompt service really separates her from the rest.

    We would not hesitate to recommend Pink Finance to anyone looking for a professional tailored service.

    We will definitely utilise the service of Pink Finance for our next investment.

  • You provide emotional as well as transactional support which is appreciated given the stress typically associated with property purchasing!

  • Nicole and her team were absolutely wonderful to partner with for our home refinancing and purchase of investment properties. We are delighted with the outcome, but in fact also enjoyed the whole process thanks to the team at Pink Finance. Will be recommending them to all our friends and family.

  • Fantastic service and knowledge. Excellent.

  • Nicole is a consummate professional in every way. She responded to our urgent query with great speed and if it wasn’t for her assistance we would never have been able to move fast enough to buy our home. Her expertise helped us navigate a complex market quickly to identify the right lender for us. From start to finish she made the whole process as pain-free as possible. She’s just awesome to work with and we are ever grateful to her for helping us secure our home.

  • Your professional and expert knowledge in your field has been a fantastic resource for new clients. The ladies have a great understanding and ability to convey this information to clients. I have put my trust in them and have always been reassured that they would help me through this process the whole way. A supportive and encouraging team and I would highly recommend to all people considering their service.

  • A very professional and courteous service with information constantly being updated. I would highly recommend this Nicole Cannon to anyone.

  • Nicole Cannon is the best broker I have ever worked with and I have used many other brokers over the years. She took the time to understand my needs and has a very proactive and pragmatic approach to sniffing out the best deal. Nicole also has an impressive network and her knowledge of the industry is second to none. Not only will I recommend her to all my friends, I shall be using her again and encourage others who read this to use her as well!

  • I have two small children and my wife and I are both working, so our time is extremely tight and finding time to do anything during normal business hours is almost impossible. Nicole was always not only completely accommodating of our schedule and able to meet us after hours at short notice, she always did so with a big smile and a friendly manner.

    As well as being friendly and easy to deal with, Nicole really knows her game. She was well schooled in the best deals in the market each time we met her and did whatever it took to get us the best home loan overall. I’ve been unimpressed by other mortgage brokers in the past, so had done my homework though other lenders and could never beat the deals that Nicole was not only bringing to me but doing all of the hard work in getting the applications completed. I would recommend Nicole to anyone. 10/10.

  • Very fluent service and understanding what I need! I was thoroughly impressed by Nicole’s attention to detail and a focus on exactly what I required.

  • Nicole was very professional and yet approachable. She organised my daughter and her partner’s first home loan. She did a great job, and graciously answered myriads of questions. Nicole made the process simple and took the stress out of loan hunting for them, allowing them to concentrate on finding a home. She then juggled the refinancing of multiple loans for us which enabled us to act as guarantor for our daughter. Nicole suggested amalgamating our loans with the same provider as my daughter and also guided us through the sale of an investment property. Unexpectedly, Nicole managed to save us a lot of money on our own mortgages as well.. an added bonus! We highly recommend Nicole, and have already passed on her name to friends and colleagues.

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Get in touch with us today.

0414 633 793    nicole@pinkfinance.com.au