Westpac and Bank of Queensland will be the first banks to strengthen home lending assessments in line with recent changes to APRA’s expectations on interest rate buffers.
The prudential regulator announced on 6 October that it expected regulated lenders to test a loan applicant’s capacity to repay against an interest rate buffer set three percentage points above the prevailing rate.
APRA previously required lenders to test borrowers against a rate buffer of 2.5 per cent.
Westpac and BoQ will begin using the 3 per cent rate buffer on loans received from 29 October.
“The new buffer rate will be applied for any application received on or after Friday 29 October 2021,” Westpac told brokers in a memo.
“Applications received via ApplyOnline up to and including Thursday 28 October 2021 that are accompanied by standard supporting documents sufficient to allow the assessment of the application, will have the previous buffer rate of 2.50 per cent p.a. applied where pipeline policy is met.”
These changes will also take effect with the same timing across Westpac’s regional brands – St George, Bank of Melbourne and Bank SA.
BoQ will introduce the new rate buffer on Friday but has also advised brokers that applications submitted by close of business tomorrow that require reworking will be assessed under the 2.5 per cent buffer.
“Applications submitted on or before Thursday, 28 October 2021 that require rework after this date will be assessed under the current 2.50 per cent buffer, provided there is no material change to the application,” BoQ told brokers.
BoQ includes increases in loan size and changes to loan security in its definition of “material changes”.