How will the RBA’s recent lending changes affect house prices?

A quick update on the RBA interest rate changes

Recently, the RBA have made a small macro-prudential change to the lending environment by increasing the “buffer rate” from 2.5% to 3%.

When calculating your serviceability, the banks will add the “buffer rate” to the actual interest rate you will pay on your home loan to ensure you can service the loan at a higher rate, should the cash rate increase over subsequent years.

Under the new changes, this means borrowers need to show they can service an extra:

  • $166 per month on a $400,000 mortgage
  • $250 per month on a $600,000 mortgage
  • $416 per month on a $1,000,000 mortgage

APRA believe this change will reduce borrowing capacity of a typical borrower by 5%.

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