09 Jul 2019
The New Financial Year Begins With A Bang
Just one week into the 2019/20 financial year and already we’re seeing a huge spike in activity at ResortBrokers with 12 new listings, 10 agreed deals and six settlements in just five working days last week.
The flurry of activity confirms the fact that business confidence has lifted dramatically since the federal election and, in a move that will more than likely benefit home loan borrowers and the wider property market, the Australian Prudential Regulation Authority (APRA) confirmed it will remove the 7 percent interest rate buffer for residential mortgage lending.
APRA says it will proceed with the proposed changes on serviceability assessments flagged in May. The buffer had been in place to ensure borrowers could make repayments on higher interest rates, with most banks applying a minimum rate of 7.25 per cent as industry standard.
ResortBrokers National Sales manager Trudy Crooks says the uncertainty in business that lingered prior to the election now appeared a thing of the past, especially with the APRA announcement.
“Things have gone off with a bang even though we’re only just into the new financial year,” Ms Crooks said.
“Business confidence has been on the up since the election, without a doubt, and I think what we’re seeing is a lot of people who’ve been sitting on the sidelines have suddenly decided to get moving again.
“And APRA relaxing that seven percent buffer will provide an even bigger boost to business confidence, and not just for homeowners, as it should flow through to people who want to borrow for business as well.”
As of Friday's announcement, lenders can now set their own serviceability minimums, as long as they apply a 2.5 percent buffer over the loan's interest rate.
APRA put the measures in place in December 2014, at the height of the residential boom, to reinforce lending standards.
The APRA announcement was made just days after the Reserve Bank cut the cash rate to a historic low of one percent and the federal government’s $158 billion worth of tax cuts aimed at boosting the economy.