As new mortgage rules kick in, will home prices drop?

suburb near the water going to be affected by new apra rules

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.

Home loan comparisons on Mozo - last updated 13 April 2024

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
  • Mozo Expert Choice Badge
    Express Home Loan

    Owner Occupier, Principal & Interest, LVR <90%

    interest rate
    comparison rate
    Initial monthly repayment
    6.01% p.a. variable
    6.14% p.a.

    Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

    Compare
    Details
  • Mozo Expert Choice Badge
    Police Value Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR <90%

    interest rate
    comparison rate
    Initial monthly repayment
    5.79% p.a.
    fixed 3 years
    6.26% p.a.

    Refinance your eligible home loan to get $2,000 cashback (T&Cs apply). Establishment fee applicable. Stay in control of your financial future and lock in some certainty with the Police Bank Fixed Value Home Loan. Only 10% deposit required. No monthly account keeping fee or annual fee to pay. Choose your repayment schedule – weekly, fortnightly or monthly.

    Compare
    Details
  • First Home Buyer Loan Special

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    5.90% p.a. variable
    5.93% p.a.

    A low variable rate loan for home buyers. No establishment or ongoing fees to pay. 100% offset account included. Allows for unlimited repayments, redraws and flexible repayment options.

    Compare
    Details
  • Basic Home Loan Special Offer

    Owner Occupier, Principal & Interest, LVR 80-95%

    interest rate
    comparison rate
    Initial monthly repayment
    6.69% p.a. variable
    6.70% p.a.

    Compare
    Details
  • FHBG Special Offer Classic Home Loan

    interest rate
    comparison rate
    Initial monthly repayment
    6.24% p.a. variable
    6.26% p.a.

    Compare
    Details
  • Basic Variable Home Loan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    5.94% p.a. variable
    5.99% p.a.

    Compare
    Details
  • First Home Buyer Variable Home Loan

    Advantage Plus, Owner Occupier, Interest Only, LVR >90%

    interest rate
    comparison rate
    Initial monthly repayment
    5.99% p.a. variable
    6.76% p.a.

    Compare
    Details

* 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.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.