2023-05-19 07:57:17
Australian bank Westpac Banking Corp said it would refinance loans from some borrowers who do not meet an industry standard that assesses their ability to repay, putting pressure on the banking regulator to ease guidelines following a year of rising interest rates.
The national mortgage lending number two told mortgage brokers that “if a customer is unable to meet the standard assessment criteria” they may apply a modified repayment capacity assessment rate.
He did not specify what that modified rate would be.
The Australian Prudential Regulation Authority (APRA) advises banks to only give loans to their customers if they believe they can repay them at a rate three percentage points above current market rates.
Australia’s big four banks have publicly asked APRA to relax this rule. They argue that following a year in which the central bank raised rates every month but one, some people who took out a loan before that date are now unable to refinance it because they would not respond the criterion of 3% repayment capacity.
APRA was not immediately available for comment. It said in February that it planned to maintain the 3.0% safety margin despite changing economic conditions.
The wheel being a guideline, the banks are authorized to deviate from it.
“The current buffer of three percentage points helps ensure new borrowers don’t take on excessive debt relative to their income, but the test locks some existing borrowers into mortgage prison,” the comparison website said. RateCity rate in a press release.
“APRA should consider formally lowering the viability buffer for refinancers.
National Australia Bank Ltd declined to comment. Representatives of Commonwealth Bank of Australia and ANZ Banking Group Ltd were not immediately available for comment.
($1 = 1.4743 Australian dollars)
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