Borrowing capacity drops despite RBA staying on hold

BORROWING capacity for home loan customers continues to fall due to tighter lending conditions despite the Reserve Bank of Australia (RBA) keeping official interest rates at all-time record lows for almost two years, says mortgage broker network 1300HomeLoan.

1300HomeLoan managing director John Kolenda said while mortgage holders will appreciate the stability of the RBA’s cash rate being maintained at 1.5 per cent, they are currently experiencing out-of-cycle rate increases from many lenders because of cost-of-funding pressures and regulatory requirements.

"Borrowing capacity for consumers has dropped up to 30 per cent over the past quarter and the borrowing parameters vary by lender, making it very challenging for borrowers to understand how much they can borrow and from whom," Mr Kolenda said.

"Cost-of-funding issues has forced some lenders to increase the rates of some home loan products by more than 30 basis points, while other lenders play a ‘wait and see’ game under the spot light of the Hayne Royal Commission, but they have the same pressure to increase rates out of cycle.

"The expert guidance of an experienced mortgage broker has become more important than ever for consumers in the current environment. There is no reason for home owners to be mortgage prisoners and that is where brokers come into their own helping clients.

"They can guide new home loan customers through the more stringent application process and enable existing mortgage holders to secure the best terms and interest rates through their access to a wide variety of lenders."