Serviceability floor Rate

Discussion in 'Loans & Mortgage Brokers' started by sumterrence, 23rd Mar, 2020.

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  1. sumterrence

    sumterrence Well-Known Member

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    Do you guys think banks will start reviewing their servicing floor rates to further ease up lending to support government QE initiatives? With interest rates not going to rise anytime soon I think a reduced floor rates should be on the cards.
     
    sumterrence, 23rd Mar, 2020
    #1
  2. shorty

    shorty Well-Known Member

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    I doubt anyone wants more residential debt in the system at this point
     
    shorty, 23rd Mar, 2020
    #2
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Only takes one to do it, they will get smashed with new work and will have to pull up stumps

    Hard to gauge really

    ta
    rolf
     
    Rolf Latham, 23rd Mar, 2020
    #3
  4. smallbuyer

    smallbuyer Well-Known Member

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    Any updates on floor rates?
     
    smallbuyer, 10th Feb, 2021
    #4
  5. Sackie

    Sackie Well-Known Member

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    Sackie, 10th Feb, 2021
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  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Most are a little above 5%.

    Technically there is no requirement for floor rates at this point, but the assessment rate must be 2.5% above the actual rate, but quite a few lenders still use them (and they're often more than 2.5% above what you are paying). This suggests to me that lenders won't be easing their policies very quickly even if the regulators do.
     
    Peter_Tersteeg, 10th Feb, 2021
    #6
  7. Redom

    Redom Mortgage Broker Business Plus Member

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    APRA prescribe that lenders have floor rates as well as the 2.5% rule in APG223.

    In the lending frameworks, APRA have 'wishy washy' wording about what the floor rate should be - tied to the medium/longer term interest rate setting in the economy. Given they've been loose with their wording here, banks, who want to lend, effectively just move the floor rate down whenever it approaches the 2.5% + actual rate. Hence floor rates are around 5-5.1% now - roughly 2.5% above the variable rate mortgage for a P&I OO loan.
     
    Redom, 10th Feb, 2021
    #7
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    As an aside

    APRA and ASIC love grey and opaque so that the responseability for individual borrower failures and lender/broker "breaches" cant be attributed to poor regulation.

    Recent BID is a fab example whereby a broker will almost always be non compliant until we have some case law, and PI premiums of 15 k + per year such as is the case in Financial Planning.

    ta
    rolf
     
    Rolf Latham, 11th Feb, 2021
    #8