As new mortgage rules kick in, will home prices drop?
The Australian Prudential Regulation Authority (APRA) has announced that future property buyers will have to prove that they can repay their mortgage if rates rise by 3%.
Typically when you apply for a home loan, your lender stress tests your ability to meet loan repayments (also known as home loan serviceability) at a higher rate. This is to make sure that you don’t default on your loan if interest rates go up.
The new APRA rule increased the standard stress test by 50 basis points, and lenders are expected to increase their own tests by the same number of points.
The rule will reduce how much you can borrow by about 5%, which means if you have an annual income of $150,000, your borrowing power falls by about $46,000.
If you have already lodged a home loan application or applied for pre-approval, you won't have to worry about the stress test increase. Many big banks have said they will honour the original stress tests for those who applied before Monday 1 November.
While this may seem like a slap in the face to potential first home buyers who are struggling to enter the property market, APRA’s new rule aims to reduce the number of people struggling with repayments, especially if the Reserve Bank of Australia increases interest rates.
"[The move by APRA does make things harder for certain borrowers] but it also flows through to property prices. Fewer people can afford the ridiculous prices that are around now, so unless wages start to catch up, property prices have to slow down. So that’s what they’re trying to do by putting those kinds of higher hurdles in place," said Mozo banking expert Peter Marshall.
It may sound a bit grim if you are trying to enter the market but with the potential of prices decreasing, it could be worth the wait.
If you are looking to buy new property soon, check out Mozo’s home loan comparison table to find the right loan for. And if you want to learn more about how to enter the property market check out our home loan guides.
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Promoted
Variable Home Loan 90
- Principal and Interest
- LVR <90%
Go to site- Interest rate
-
6.04
%
p.a.
Variable
- Comparison rate
-
6.06
%
p.a.
- Initial monthly repayment
-
$4,335
Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.
- interest rate
-
6.04% p.a. (6.06% p.a.*)
- Fixed loan revert rate
-
n/a
- Upfront fees
-
$530
- Ongoing fees
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$0.00
- Discharge Fee
-
$0.00
- Package
-
-
- Maximum loan to value ratio
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90.00%
- minimum borrowing amount
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$50,000
- maximum borrowing amount
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$2,000,000
- type of mortgage
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Variable
- Repayment types
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Principal & Interest
- Availability
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Owner Occupier
- Repayment options
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Weekly, Fortnightly, Monthly
- Extra repayments
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yes - free
- Redraw facility
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yes - free
- Minimum redraw amount
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$0.00
- Offset account
-
yes
- Split account
-
yes
- Other restrictions
-
Offset sub-account available for additional +0.10%. $300 discharge fee and $250 discharge documentation fee applicable if loan doesnt go to full term.
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-
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Fixed Home Loan
- Owner Occupier
- Principal & Interest
- LVR <95%
Go to site- Interest rate
-
5.69
%
p.a.
Fixed 2 years
- Comparison rate
-
6.34
%
p.a.
- Initial monthly repayment
-
$4,174
Get the security of a competitive fixed rate home loan for 2 years with IMB. Get up to $4,000 cashback (T&Cs apply). Up to 12 months repayments in advance without penalties. Free Internet and Mobile Banking redraws (T&Cs apply). Up to a 30 year loan term. Split loan available. No offset account.
- interest rate
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1 year - 6.19% p.a. (6.45% p.a.*)
2 years - 5.69% p.a. (6.34% p.a.*)
3 years - 5.69% p.a. (6.28% p.a.*)
4 years - 5.89% p.a. (6.30% p.a.*)
5 years - 5.89% p.a. (6.27% p.a.*)
- Fixed loan revert rate
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6.34% p.a.
- Upfront fees
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$799
- Ongoing fees
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$6.00 monthly
- Discharge Fee
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$350.00
- Package
-
-
- Maximum loan to value ratio
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95.00%
- minimum borrowing amount
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$10,000
- maximum borrowing amount
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$5,000,000
- type of mortgage
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Fixed
- Repayment types
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Principal & Interest
- Availability
-
Owner Occupier
- Repayment options
-
Weekly, Fortnightly, Monthly
- Extra repayments
-
yes - free up to 1 year in advance
- Redraw facility
-
yes - free
- Minimum redraw amount
-
$500.00
- Offset account
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no
- Split account
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yes
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Monthly fee only applies to fixed period of loan.
- Other benefits
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-
- Special Offers
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$4,000 cashback for loans $750,000 and above with a maximum LVR of 80%, settled within 90 days of application for refinancers or 180 for purchase loans. $3,000 for loans between $500k and $749k, $2,000 for loans between $250k and $499k.
Read reviews and learn more about IMB Bank home loans
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Variable Home Loan 90
- Principal and Interest
- LVR <90%
Go to site- Interest rate
-
6.04
%
p.a.
Variable
- Comparison rate
-
6.06
%
p.a.
- Initial monthly repayment
-
$4,335
Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.
- interest rate
-
6.04% p.a. (6.06% p.a.*)
- Fixed loan revert rate
-
n/a
- Upfront fees
-
$530
- Ongoing fees
-
$0.00
- Discharge Fee
-
$0.00
- Package
-
-
- Maximum loan to value ratio
-
90.00%
- minimum borrowing amount
-
$50,000
- maximum borrowing amount
-
$2,000,000
- type of mortgage
-
Variable
- Repayment types
-
Principal & Interest
- Availability
-
Owner Occupier
- Repayment options
-
Weekly, Fortnightly, Monthly
- Extra repayments
-
yes - free
- Redraw facility
-
yes - free
- Minimum redraw amount
-
$0.00
- Offset account
-
yes
- Split account
-
yes
- Other restrictions
-
Offset sub-account available for additional +0.10%. $300 discharge fee and $250 discharge documentation fee applicable if loan doesnt go to full term.
- Other benefits
-
-
- Special Offers
-
-
Read reviews and learn more about loans.com.au home loans
Go to site
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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
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