CBA first to tighten home lending
THE Commonwealth Bank has become the first of the big four banks to tighten home loan standards, just a day after regulators warned the sector over rising credit growth that has turbocharged housing markets.
The bank said it was changing the home loan assessment floor rate used to assess home and investment home loan applications from 5.10 per cent per annum to 5.25 per cent per annum. The serviceability floor rate is used by banks to judge whether borrowers can meet repayments.
Australia’s biggest bank said that from Saturday, as part of its regular monitoring and review of policies and services, it had reviewed its serviceability floor rates “to ensure we continue to lend responsibly in the current low interest rate environment”.
It said while it was changing the assessment floor rate, the interest rate buffer used on loans would remain unchanged at 2.50 per cent per annum.
The Commonwealth Bank insisted that most customers applying for a home loan would not be affected by the change.
Lenders are required by the Australian Prudential Regulation Authority to ensure that borrowers can repay loans at the higher of 2.5 per cent more than current interest rates, or the floor rate set by the bank.