ANZ Banking Group is the first lender to pass on the benefit of the loosened lending limits announced last week that are tipped to greatly increase purchasing power for homebuyers.
The Australian Prudential Regulation Authority (APRA) last Friday announced it would relax its rules that meant banks had to assess a borrower's ability to repay their mortgage if interest rates rose to 7 per cent.
Under the change in rules, banks would now only have to apply a 2.5 per cent “sensitivity margin” on current interest rates when assessing home loan eligibility.
On Thursday, ANZ told mortgage brokers it would lower its mortgage assessment floor to 5.5 per cent.
ANZ said the new policy would come into effect on Monday.
An ANZ spokesman said APRA’s decision was sensible in the current low rate environment and the new rates would give more Australians the opportunity to buy a home or refinance their loans.
The investors have been out of the market for a while so might see a little spike there.
When the APRA move was announced experts predicted the change could significantly lift borrowing capacity.
RateCity estimated that if a bank used an assessment rate of 6 per cent instead of the current 7.25 per cent, a family of four with an average household income of $109,688 would see their borrowing capacity rise by $77,000.
Mortgage broker, and partner at Melbourne’s UFinancial, Daniel Rainey said he was hopeful an assessment floor reduction by the banks would help home buyers return to or enter the market.
"The investors have been out of the market for a while so we might see a little spike there… And the same deal for owner occupiers. The family home might be a bit more achievable," Mr Rainey said.
"Some people are saying it’s a really bad sign that we’re down at these low rates but then the more optimistic person is saying if money is easier to get and at lower rates it can only lead to more money being invested back in the economy."
The other big banks are yet to announce their new floor rates.
Commonwealth Bank, Westpac and National Australia Bank said on Thursday they were reviewing their serviceability requirements.
The move comes as home lending has collapsed to its worst level since the global financial crisis as households shy away from taking on more debt despite house prices showing signs of bottoming out.
New official figures show the value of housing finance issued in May fell 2.4 per cent and was down year-on-year by close to 21 per cent, the worst result in a decade.
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