Interest rate serviceability test

Hi,

Is there any lander that has acted upon APRA proposal to change the interest rate serviceability test from flat 7% to 2.5% above mortgage rate?

I am paying 5.75% on my investment loan currently and desperately need to refinance to a cheaper loan.

St. george rejected my application last April due to failed serviceability test at 7%.

 

No not yet, some lenders do negative gearing add backs at the assessment rate which adds a fair bit to borrowing power. Other lenders offer a lower assessment rate on existing mortgage facilities not being refinanced, which may help.

I think this may take a little bit more time to flow through.

 

When is the 4 week consultation period up? This week sometime? If so, I'm going to suggest its a reasonable chance we will start seeing servicing calc changes in the next week or two...

 

Formal application. Initial numbers looked fine so my broker decided proceed but in the end my application fell short of approx $9k.

 

10k shortfall in serviceability would translate to more than 100k in loan. I don't have 100k sitting around that I can put in.

 

Apparently a major bank dropping to 6.50% shortly (on OO deals though).

Most will move in the next few weeks/months then.

There’ll be a suite of changes across the board and different lenders may have different approaches here (Apra’s change allowed wiggle room).

 

Hi Redom,

do they add back it entirely or is it at a portion? and which lenders offer this?

Cheers, Elives

 

Resimac, Firstmac. Entire I believe.

 

$9K shortfall in serviceability? Yikes, what did the broker get wrong on their calcs compared to the lenders? Mind you St George is one of the tougher ones, serviceability wise, did your broker discuss any other lender options?

 

It wasn't a straight forward calculation.
Application included portfolio of 6 investment properties (4 of them are dual occupencies so 10 tenancies). Applicants are IT contractors (230k + 180k per year salaries) so St George considered only 46 weeks income. Total loan approx $4.2m spread across 11 loans with 3 different lenders.

We wanted to refinance 3 loans with a sum of $1.8m

 

Doesn't seem that complicated though, just needed to check policy in regards to contract income prior to submitting to the lender but we're all human and make mistakes from time to time.

 

@property_geek - try Resimac via your broker. That much debt may be a 9kp.a shortfall difference. Will need to verify employment and use of income with them on this though (may be a sticking point). Some of the sharpest rates in market for IO variable too.