Two of the big four banks have updated their home loan serviceability assessment policy in response to APRA’s regulatory amendments.
ANZ and Westpac have both announced changes to their interest rate floor for home loan serviceability after changes by APRA.
The changes have come in response to the Australian Prudential Regulation Authority’s (APRA) decision to scrap its 7 per cent interest floor and raise its buffer to 2.5 per cent.
ANZ was the first major lender to implement changes, reducing its interest rate floor for home loan serviceability assessments from 7.25 per cent to 5.5 per cent and increasing its sensitivity buffer from 2.25 per cent to 2.5 per cent.
Westpac followed with an announcement to reduce its rate floor from 7.25 per cent to 5.75 per cent and increase its buffer from 2.25 per cent to 2.5 per cent.
This marks the second time Westpac announced revisions to its policy over the past month, after it sought to preemptively amend its guidelines before the reforms were finalised.
The bank had initially announced that it would allow its credit officers to use their discretion when assessing low-risk home loan applications that did not pass the serviceability test, but reversed its decision after holding discussions with APRA.
Commonwealth bank and NAB have both said they’re in the process of reviewing their policies.
A CBA spokesperson welcomed the regulatory changes, stating: “We support APRA’s decision to update its guidance relating to serviceability assessment rates.
“We worked closely with APRA throughout their consultation period. We are now reviewing our serviceability rates based on the new guidance while taking into consideration our portfolio mix and risk appetite.”
A NAB spokesperson also welcomed the updated guidance, adding that “now is the right time” given the “low interest rate environment”.
“We consider all lending applications on a case-by-case basis and are committed to lending responsibly,” the NAB spokesperson stated.
“Serviceability is assessed on a number of factors to ensure customers can make repayments both now and into the future.”
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