How the new 3% mortgage stress test will affect homebuyers from November

New home loan rules are about to come into effect that will limit the amount people can borrow from the bank.

Starting Monday, banks are to make sure new mortgage applicants can pay off their mortgages if rates rise 3%. The current “stress test” is 2.5 percent higher than current rates.

APRA, the government regulator that enforces the rule, said it would reduce people’s maximum borrowing capacity by about 5%.

What will happen to people who have obtained pre-approval or to those who are waiting for their mortgage to be paid?

The Big Four have said unconditional approval loans that have yet to be settled will still be processed using the old 2.5% availability test.

Large banks will also assess clients with pre-approval who have not yet purchased a property using the old stress test, provided they purchase and apply for a full loan within 90 days for CBA, Westpac and NAB and 120 days for ANZ.

As a safety measure, customers who have not yet purchased should check with their bank before bidding on a home, especially if their circumstances have changed.

What impact will the new 3% mortgage stress test have on borrowers

Analysis from RateCity.com.au shows that for a family of four with an annual family income of $ 150,000, their maximum borrowing power for a home loan could decrease by about $ 46,900.

For a single person with an annual income of $ 100,000, the maximum they can borrow could drop by about $ 34,900 under the new increased mortgage stress test.

These calculations are based on the ABC’s utility calculator on a fixed rate loan. Note: Variable basis customers may be able to borrow more. See full assumptions below.

Impact on a family of 4 wishing to take out a mortgage

Household income Current borrowing capacity New maximum borrowing capacity Difference
$ 100,000

$ 570,300

$ 541,600

– $ 28,700

$ 150,000

$ 930,800

$ 883,900

– $ 46,900

$ 200,000

$ 1,292,100

$ 1,226,900

– $ 65,200

$ 250,000

$ 1,636,100

$ 1,553,700

– $ 82,400

$ 300,000

$ 1,949,200

$ 1,851,000

– $ 98,200

Impact on a single person who takes out a mortgage

Single income Current borrowing capacity New maximum borrowing capacity Difference
$ 100,000

$ 692,100

$ 657,200

– $ 34,900

$ 150,000

$ 1,000,500

$ 950,100

– $ 50,400

$ 200,000

$ 1,331,400

$ 1,264,300

– $ 67,100

$ 250,000

$ 1,610,900

$ 1,529,700

– $ 81,200

Source: RateCity.com.au. Notes: Calculations are based on ABC’s Utility Calculator for a borrower on a fixed rate homeowner loan paying principal and interest with a return rate of 3.85%. Household income assumes one adult working full time and one adult working part time earning half the salary with two dependent children and no other debt. Minimum household expenses are applied, depending on income.

Why has APRA increased the maintenance margin to 3%?

APRA has increased the buffer to make sure people can make their repayments when rates go up.

Starting Monday, banks will have to check whether people can repay their loans at 3% more than their current interest rate, or the “floor” rate set by the bank – whichever is greater.

RateCity.com.au Research Director Sally Tindall said: “Anyone intending to bid at an auction in the next few months should call their bank to check how much they can borrow.

“While the big banks have all said they will meet pre-approvals, if your situation has changed you may have to start over under the new rules,” she said.

“The last thing you want your new home loan to do is fail.

“While buyers who aren’t borrowing at or near full capacity are unlikely to be deterred, this new change could be the last straw for some first-time homebuyers trying to push their limits to get into the market. the market.

“While the new, higher mortgage stress test may seem frustrating to some, this move is designed to protect borrowers when rates no doubt rise.

“APRA considers loans with a debt-to-income ratio of six or more to be risky, and already, 21.9% of new loans have reached this benchmark in the June 2021 quarter.

“If debt levels continue to rise, we will likely see APRA step in with additional restrictions before the end of the year,” she said.

Floor service rates for the big four banks

ABC

5.25%

Westpac

5.05%

NAB

4.95%

ANZ

5.10%

How the Big Four Banks Handle Existing Home Loan Applications:

Note: The scenarios below assume that there are no significant changes in the application. Significant changes could trigger a restart of the app.

Clients who have purchased a property, have their loans approved, and are awaiting payment. Customers with pre-approval but not yet purchased a property.
ABC Customers will always be assessed using a 2.5% buffer. Customer rated at 2.5% provided it turns into a full app within 90 days.
Westpac Applications approved before Thursday, October 28, 2021 are assessed on the basis of the previous cushion rate of 2.50%. Customers who received approval in principle before October 28 will be assessed using the 2.5% buffer if they get full approval within 90 days.
NAB Customers will always be assessed using a 2.5% buffer. Customer rated at 2.5% as long as it turns into a full app within 90 days.
ANZ Customers will always be assessed using a 2.5% buffer. Customer rated at 2.5% as long as it turns into a full app within 120 days.


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