RBA weighs alternatives to a cut Could APRA cut the 7.25% assessment rate?

RBA weighs alternatives to a cut

Will the RBA ask APRA to reduce assessment rate ?

What do you guys think.

In my opinion a hell of lot more effective than any intrest rate cut.

 

They will...give it another month or so.

 

Better to do that and leave interest rate drop until its required

 

Or increase money supply to the market to artificially bump up wages and asset prices.

 

I will be happy if that is the avenue they take.

 

Give it 6 months and if it doesn't work , then try something else and so on we go.
Eventually , like a rubber band everything will snap back when we have made 4 or 5 changes and the market will take of again.
But the real issue is the possibility of the small proportion of investors that are forced to sell in 2019 and 2020 due to the expiry of their IO loans, which is peaking in 2019 and 2020, before tapering off in 2021
For those rolling over in 2020, there purchase dates would have been around 2015 and might start to feel some pressure if house prices keep on falling through 2019

 

"According to mortgage brokers, more than 90 per cent of banks apply a further 0.25 per cent buffer to this minimum benchmark."
Any brokers care to name some of these rare 7.0% assessment rate lenders? Asking for a friend...

 

Add not deduct so 7.50.
Some go further like ING and have 8.0.

Low rates are here to stay for a long time and with say 3.9 the average having nearly entire 3bps is still a very good conservative buffer.
Borrowing capacity would still be smashed from pre APRA which I think is important.

It’s not a golden bullet but giving a 5% increase to borrowing may:
1 - Allow some stuck people to refinance for better rates increasing cash flow.
2 - Allow some stuck people to get a cash out to increase spending.
3 - Halt the decline in house prices falling and maybe even give them a small little boost (VERY SMALL )

It has the potential to do this with very minimal risk so I think it’s a bit of a no brainer.

 

I would say St George would be one given the mortgage I was recently accepted for. Happy to be proven wrong

 

Nope - St George are actually one of the tougher lenders regarding serviceability - should note that it would also depend on you personal financial situation but they definitely apply 7.25%+ as assessment rate for new lending

 

So no ADI's assess at APRA's bare minimum 7.0%?

 

The only lender I am aware of who uses 7% is FirstMac. While they are not an ADI, they play nice with APRA because they warehouse all their loans with onshore banks before securitising them - if they didnt use 7% they may not be able to do that . FYI they also add back neg gearing at 7% and accept 100% of bonuses, commissions, overtime etc - - which is handy for some borrowers

They may not be a non ADI much longer, just quietly. Looks like Firstmac moved one step closer to controlling a small ADI today. Kim just bought himself a banking licence for $7Million. He is leaps and bounds ahead of every other operator in this industry as far as business acumen goes ...
Lender takeover approved by members - Mortgage Business

 

What is the historical basis, if any, setting the benchmark at 7.25%? Is it based on long term
average or just a historical buffer of 2%-3% above actual lending rates?

 

ANZ first bank to ask for change on this...
ANZ says 7.25pc buffer has to go
Wonder how many will follow suit

 

Given the large increase in prices, the decline has been modest. On most objective measures, Melbourne and Sydney prices in particular are still quite high. I don’t think APRA would be getting worried yet about prices, given their focus on financial stability.

 

The banks are plenty worried about their revenue and profits though.

 

True, but defaults remain modest. From a financial stability view, APRA are probably reasonably happy with the modest price falls.

 

I meant in terms of new business, being able to write up new loans etc. If word on the street is true, noone is qualifying for loans.