ASB becomes second bank this week to increase home loan stress test

By on May 3, 2022 0

ASB is the second bank this week to raise the interest rate it stress tests mortgage applicants from 6.85% to 7.35%.

The country’s largest mortgage lender, ANZ, confirmed on Tuesday morning that it had raised its service sensitivity rate from 6.7% to 7.15%.

The changes will reduce the amount most buyers can borrow by about 4.5%, Mortgage Lab chief executive Rupert Gough said.

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Mortgage Lab chief executive Rupert Gough said tougher stress testing would reduce the amount of money in the market.

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Mortgage Lab chief executive Rupert Gough said tougher stress testing would reduce the amount of money in the market.

In other words, if a borrower had $800,000 pre-approved last week, that would drop to around $764,000.

Gogh said the ripple effect would be that buyers would be taken out of competition for a certain price range of property and move down a notch on the ladder, which in turn could reduce prices further.

“Fewer buyers, less demand, house prices go down,” Gough said.

“And already the buyers were quite thin on the ground.”

He said while stress test increases were another hurdle for buyers, along with rising interest rates and stricter lending rules under the Credit Agreements and Credit Union Act consumption, it was not the bank’s fault, and ANZ was acting correctly and responsibly to ensure that borrowers could afford their mortgages.

An ANZ spokesperson said the bank’s sensitivity rate was changed on Monday and regularly revised to reflect changes in interest rates.

Real estate investor Steve Goodey said that with stress test rates so high, the Reserve Bank might not need to impose debt-to-income ratio requirements on <a class=loans.” style=”width:100%;display:inline-block”/>

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Real estate investor Steve Goodey said that with stress test rates so high, the Reserve Bank might not need to impose debt-to-income ratio requirements on loans.

“This means that when interest rates rise, we will likely increase the service’s sensitivity rating to ensure that we have sufficient buffer in our affordability ratings so customers can continue to repay their home loans despite rising rates.”

The service sensitivity rate referred to a constraint on the debit interest rate only, and not on the customer’s consumption behavior.

“The service sensitivity rate is one of the buffers we build into our affordability calculations to help ensure customers are able to manage their repayments if interest rates rise,” the carrier said. word.

ANZ is the largest home loan provider in the country.

David Hallett / Stuff

ANZ is the largest home loan provider in the country.

An SBA spokesman said the bank changed its stress test rate on Monday, after considering a range of factors including current and expected economic conditions, current home loan interest rates and how interest rates might change over a longer period.

“Typically, our test rate is a few percentage points higher than the customer’s loan rate,” the spokesperson said.

“We do this to ensure customers have room in their current budget to make larger repayments if interest rates rise.”

Real estate investor Steve Goodey said the change would force more people out of the market and likely cause more people to turn to second-tier lenders, who charged higher interest rates but had no settlement rules. loan as strict.

ASB has raised the interest rate it stress tests mortgage applicants from 6.85% to 7.35%.

Kirk Hargreaves / Stuff

ASB has raised the interest rate it stress tests mortgage applicants from 6.85% to 7.35%.

“It got to the point of being a little ridiculous to get the money approved,” Goodey said.

He expected the tagged property to be further slowed by the tougher stress tests and that sales volumes were likely to fall.