The number of homeowners refinancing their mortgages is on the rise as banks shun APRA’s 3% lending buffer.
APRA recommends that banks add a buffer of 3% to current interest rates when accessing a borrower’s capacity to repay.
But some of the big banks are now allowing some owners to refinance without strictly adhering to the 3% buffer. The Commonwealth Bank of Australia, NAB, and Westpac are allowing a 1% buffer to refinancers who meet certain criteria.
Despite the change in tactic, banks are still being cautious about who they lend to with key considerations including whether borrowers have savings and the ability to repay the loan.
Banks are also factoring in the additional costs associated with switching lenders such as break costs from exiting an existing loan, establishment and discharge costs.
With the RBA continuing to increase interest rates, the mortgage refinancing market has picked up pace of late with homeowners keen to secure lower repayments where they can.
