APRA is making moves to quell the property boom - but will they work?
Duncan Hughes from the AFR asked for our comment on this topic, his article below.
APRA is the regulating body for banks and lending, they are touting measures such as increasing the minimum assessment rate with which a bank must test your affordability for a loan - currently banks test your affordability assuming an interest rate of around 5.25%, this would increase to 5.75%.
A harder restriction is in the wind - limiting you to borrowing 6 times the income that your bank will accept from you - that is, all rental income and most extraordinary income (overtime, bonus, commission) is scaled back to 80% in bank eyes - and some income types have really strict criteria - such as family tax benefit or child maintenance income, which has the potential to restrict certain borrowers far more than others. This measure is very strict. And by the way - these income types are not intended to pay back a loan, rather, they contribute to the living expenses of the child which would then leave more of your primary income for loan repayments.
The limit would also include all finance facilities - car loans, credit card limits, HECS.
The potential of these changes is to restrict and even lock out certain sectors from the market. Single parents I can see being the most affected as well as newly graduated professionals who carry a higher HECS burden. There are also certain sectors who are encouraged to take out car leases as a salary sacrifice in industries where it is hard to fund payrises - essentially intended to give them a vehicle partially paid for with what would have been tax, this is common in nurses and teachers = all of whom will feel the impact.
Check the link below for the full article, see if you can spot the major typo ;)
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