APRA believes its 50 basis point increase in the mortgage serviceability buffer to 3 per cent will reduce the maximum borrowing capacity for the typical borrower by around 5 per cent, but commentators have challenged this expectation.

Gareth Aird, head of Australian economics at Commonwealth Bank said APRA’s estimate is based on an assumption that borrowers borrow at their capacity, but the vast majority of mortgagors do not choose to borrow their maximum capacity.

Aird said: “Over the first half of this year, just 8 per cent of home loan applicants at Commonwealth Bank borrowed at capacity.

“The policy change will result in some future applicants borrowing less money than they would have otherwise. But our initial assessment is that current momentum in the housing market is sufficiently strong that the overall impact on dwelling price growth next year will be modest.

“If it turns out to be the case that the housing market is still causing the Council of Financial Regulators discomfort in 2022, the most likely policy response would be to further increase the minimum interest rate buffer. At this stage we consider that unlikely, particularly given we expect fixed mortgage rates to drift higher over 2022.”

Macquarie Securities called the increase in the buffer “baby steps” and said the actual effect was likely to be small.

Macquarie said that before APRA’s announcement, the constraining factor for borrowers was the 4.95 per cent to 5.25 per cent interest rate floor. The 3 per cent buffer should overtake that now.

“However, with current front book rates of around 2.3 per cent, the 3 per cent buffer would increase the assessment rate by only 5 to 35 basis points. This implies that the impact on the borrowing capacity for owner occupiers will be lowered by less than 5 per cent.”

Macquarie suggested that banks may use APRA’s macroprudential intervention as an opportunity to reprice and support their profitability, as they have done in the past.