How to beat the borrowing squeeze

TOUGHER new lending restrictions have prompted warnings for borrowers to be extra careful when applying for a new mortgage or refinancing.

A crackdown on riskier loans by the banking regulator, the Australian Prudential and Regulation Authority, has resulted in lenders demanding more information about household spending, basing repayment calculations on much higher interest rate assumptions, and being picky when assessing people’s ability to repay: “loan serviceability”.

Yellow Brick Road executive chairman Mark Bouris said a year ago banks were basing their loan serviceability calculations on an interest rate