Are the buffers bogus???

Lending criteria pre-APRA were nothing like what they are today. As Rolf indicated, there were numerous factors that made borrowing a lot easier. It's difficult to give a straight forward figure of what the difference was because there was so many loop holes that could be manipulated depending on individual circumstances. Most of these have since closed.

In some cases people could borrow almost double what they can today under the same personal circumstances. The only thing that's kept some sort of parity in borrowing power is the fact that interest rates are so much cheaper now than they were 14 years ago.

HEM isn't that simple. Living expenses used to come under the Henderson Poverty Index which was a simple figure based on family structure.

HEM is a table that cross references family structure and income. There is a different table for capital cities and regional locations in every state. Lenders then apply their own buffer on top of HEM, which they do not publish.

 

Peter,

"Thou shall borrow to the hilt of thou's BC based on mickey-mouse disclosures"
is just one side of the equation.

The other side of the equation which banks use are... the mickey-mouse 'Valuations'.
just because few JoeTheFomo's got over excited and outbid themselves for an asset in my neighborhood to a high price, Does it mean entire neighborhood now commands high valuations?
Is there any APRA mandated regulations for what an asset worth should be?

 

I'm not aware of ARPA every issuing edicts over valuations. The banks do have instruction sets for valuers that may be location based so it's quite plausible that their own risk departments would restrict lending in certain locations using valuations as a tool. It's a fairly blunt instrument though, given brokers still get a copy of the report in most cases.

Most likely any sort of restrictions on valuations will come via lenders risk departments putting LVR caps in place. For example some lenders restrict inner city postcodes by requiring LMI to be applied from 70% rather than the usual 80%. Some of the banks pricing tools also consider location, thus they can apply rate for risk criteria.