Servicing test changes limited

Wednesday 9 October 2019

Banks have made adjustments to serviceability tests since the Official Cash Rate cut in August, but advisers doubt whether the changes will have a big impact on pass rates.

ANZ cut its servicing sensitivity rate from 7.25% to 6.9% in late August. In a note to advisers, the bank said it had listened to "survey feedback".

ANZ has also separated its loan affordability calculator, making it a standalone form. 

The change comes after the Reserve Bank cut the OCR by 0.5% in August, prompting home loan rates to fall to record lows. 

Regulatory changes have also made it easier for banks to ease servicing rates. Australian regulator APRA abolished its minimum 7% testing rate for banks in August. 

An ANZ spokeswoman said: "We review our servicing sensitivity rate (SSR) on a regular basis. We reduced our SSR following August’s Official Cash Rate (OCR), cut taking into account falling interest rates, the long-term OCR outlook and recent APRA requirements."

Meanwhile, ASB has changed the interest rate used to determine loan servicing of uncommitted monthly income from 7.7% to 7.2%. The bank said it had "listened to feedback" from advisers.

Stephen Wilton, an adviser at The Advice Group, says the changes have had a slight impact on pass rates for borrowers, but says allowances still make it tight for borrowers.

"For the most part, standard mum, dad, two kids deals are pretty much of a muchness over all banks ... It does seem like a lot of deals are looking much better in terms of a pass rate, although when it comes to investors (calculated on P & I), there's still a bit of a battle."

Glen McLeod of Edge Mortgages said bank serviceability rates still hovered around the 7% mark. He doubts whether serviceability rates will fall much further in the near term: "If you look where we are, that's almost double [compared to current home loan rates]. If you look at the Responsible Lending Code, do banks have much choice?"

Comments from our readers

No comments yet

Sign In / Register to add your comment

Property News

Upping the ante on price growth

ANZ economists have become the latest commentators to revise up their house price inflation predictions and are now picking 8% growth by mid-2020.

House Prices

A decade of property price growth

Recent years have seen some spectacular house price growth around New Zealand but just how much have asking prices gone up in different markets over the last 10 years?

Commercial

Looking outside the box

The property market is heating up again – and that means more competition for good deals – but there are still options out there for keen property investors.

Mortgages

Putting the RBNZ's new capital rules into perspective

There's been a lot written about the Reserve Bank's new capital rules for banks and some of it seems to miss the mark. Here's Tarawera Publishing managing director, Philip Macalister's, take after hearing from the governor yesterday.

Site by PHP Developer