NAB (National Australia Bank), one of the 4 major banks in Australia, has updated its mortgage serviceability assessment policy.
Their amendment is in response to APRA’s (Australian Prudential Regulation Authority) changes to its home lending guidance earlier this month which allowed banks greater flexibility to set their testing rates after scrapping a minimum of 7% interest for loan applications by up to 2.5%.
With APRA’s easing credit conditions, it is intended to boost the borrowing capacity of many new customers, the RBA (Reserve Bank of Australia) has stated that the conditions in the housing market were gradually stabilizing following a drawn-out property downturn, but noted fall in prices had slowed in some markets and auction clearance rates increased.
NAB has lowered to a minimum of 5.5%, in line with its major peers. its interest rate floor to 5.5% and increased its interest rate buffer to 2.5% which covers all new home loan applications starting August 5.
It is the latest among the 4 major banks to amend it serviceability policy and joining all other competitors, the ANZ (Australia and New Zealand Banking Group), Westpac, and CBA (Commonwealth Bank), Macquarie, MyState Bank, Bendigo and Adelaide Bank, Suncorp, the Bank of Sydney and Auswide Bank.
The new NAB interest rate floor is in line with ANZ’s announcement that they would lower their interest rate floor to 5.5%.
The bank’s announcement has seen it undercut CBA and Westpac as they are the 2 major competitors which dropped their rates to only 5.7%.
At this point, Macquarie holds the lowest interest rate floor of 5.3%, on the other hand, MyState dropped its interest rate floor to only 6.2%.