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What to borrow more than you could yesterday?

From today, how much you could borrow might change. Of course the word I have to use is 'might' as all situations are different but here's the info!

The Australian Prudential Regulation Authority (APRA) which is the body that regulates Australia's finance industry, has relaxed their previous position that all banks needed to assess a borrower's capacity to repay a loan using a 7% benchmark.

Assessing against 7% meant that regardless of the offered loan interest rate, the lender assumed that the current rate was 7% and this affected serviceability (the bank's assessment of your ability to repay the loan) ultimately meaning that everyone was able to loan less than they may be able to from today.

The new rule is that there are no rules...actually not true...but the banks do have to add 2.5% to any current rate for the same exercise.

APRA came to this decision following record low interest rates (the RBA dropped the official cash rate to 1% earlier this month) and acknowledging that the environment that existed to enforce the 7% comparison no longer does. There is also some talk of further RBA rate cuts to come but as we know, we can't necessarily predict the RBA's decision any given month.

This doesn't mean that banks are relaxing their due diligence; there are still appropriate checks and benchmarks to ensure that the loan repayments don't automatically place a borrower

under financial stress.

More info here.