31/08/2023
Interest Rates & Affordability
Good news on the horizon is that some of the major banks have reduced the interest rate at which they assess a loan for qualification purposes (the servicing rate or servicing buffer). The banks add a margin on to the prevailing interest rate when assessing a loan for serviceability, initially to allow for interest rate rises in the future. This buffer has greatly affected the affordability of home loans as interest rates have risen. The margin has generally been around 3% for some time now. However, some banks, such as St George and BankWest, have reduced the margin down to as low as 1%, allowing clients to borrow more on their income. The fact that the banks are choosing to lower the buffer, is a good indication that they believe we have reached the peak of the interest rate cycle, and this in itself is good news.
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