Bit fuzzy on why the property market is slow at the moment? We’ve been told the banks are to blame, but is that true?
We’ll keep it brief, In short, the Australian Prudential Regulatory Authority (APRA) is to blame for the banks recent credit restrictions on residential loan applications. What did APRA do?
1. Introduced a 2% buffer in addition to the banks product lending rate. This means, if the bank advertises a loan at 6% they’ll assess your ability to service the loan at 8%.
2. Introduced a floor rate of 7%. This means, if the bank offers a product at 3% they’ll assess your ability to service the loan at 7%
3. Heightened assessment of your expenses. This means, more care and questions are raised about the living expenses you declare on your application.
4. Higher rates for investors and/or higher loan to value ratios (LVR’s). This means, investors pay a higher interest rate than owner occupiers, investors also need more cash or equity to secure a loan.
APRA’s actions have essentially reduced the RBA’s cash rate influence on residential property when the cash rate dips below 5%.
While we’ll see some short term stabilisation of prices, and possibly some corrections, this will ultimately cool down skyrocketing property prices that are directly linked to rock bottom lending rates.
At vendor, we’re more than just property advertisers, we’re full of knowledge and here to help with any property questions you have.
Want to read the full APRA publication: https://www.apra.gov.au/…/review_of_apras_prudential_measur…