Do you need to have your borrowing capacity recalculated? MoneyQuest’s November cash rate message

Another month has come and gone and we are now into November, which means that summer is just around the corner and the holiday season is almost upon us. But before we look too far ahead, there is a lot to celebrate here and now including:

– the cash rate staying on hold at 0.1% for another month

– variable interest rates remaining relatively low

and…

– the fact that New South Wales and Victoria have finally emerged from lockdown!

Now whilst not much has changed in terms of the cash rate and the state of variable interest rates, a significant change was recently made to the mortgage serviceability buffer. On the 6th of October, the Australian Prudential Regulation Authority (APRA) increased the minimum interest rate serviceability buffer it expects banks to use when assessing home loan applications, from 2.5% to 3%.

What does this increase in buffer mean?

It means that when a bank picks up a home loan application, they are now expected to assess whether the borrower in question will be able to afford loan repayments at an interest rate that is at least 3.0 percentage points above the loan product rate. Borrowers must be deemed capable of making repayments at the higher interest rate before being approved for their desired loan. APRA has explained that the objective of increasing the serviceability buffer is to ensure that borrowers are able to service their mortgages under a range of scenarios.

So how does this change impact you?

It may reduce the amount of money you’re eligible to borrow from a bank. However, if you are applying for a home loan through a non-bank lender, this serviceability buffer does not apply because APRA does not regulate non-bank lenders.

So if you’re in the market to buy but your borrowing capacity was assessed prior to APRA making this change, we suggest asking your MoneyQuest mortgage broker to recalculate your borrowing capacity with the new serviceability buffer in mind, before making a purchase.

  • SHARE

Disclaimer:

This article is written to provide a summary and general overview of the subject matter covered for your information only. Every effort has been made to ensure the information in the article is current, accurate and reliable. This article has been prepared without taking into account your objectives, personal circumstances, financial situation or needs. You should consider whether it is appropriate for your circumstances. You should seek your own independent legal, financial and taxation advice before acting or relying on any of the content contained in the articles and review any relevant Product Disclosure Statement (PDS), Terms and Conditions (T&C) or Financial Services Guide (FSG).

Please consult your financial advisor, solicitor or accountant before acting on information contained in this publication.


Proudly Part Of

The Money Quest Group (MQG) is one of Australia's leading boutique mortgage broking businesses, with a network of more than 600 brokers nationwide. Known for their exuberant culture and superior support, MQG provides brokers access to a range of financial products from more than 60 lending institutions and suppliers, and exclusive access to in-house benefits and services.

© 2017-2025 MoneyQuest Australia Pty Ltd, Australian Credit Licence 487823