APRA tightens home loan rules on the same day New Zealand’s Reserve Bank lifts interest rates

The banking regulator has announced tougher serviceability tests for home loans, which will make it harder for some borrowers to get a mortgage, on the same day the Reserve Bank of New Zealand starts lifting its benchmark interest rate.

In a letter to banks today, the Australian Prudential Regulation Authority (APRA) has increased the minimum interest rate buffer on home loan applications from 2.5 to 3 percentage points.

It estimates the increase will reduce “maximum borrowing capacity for the typical borrower by around 5 per cent”.

It also says the move “will not have any impact on mortgage interest rates”.

“All ADIs [authorised deposit taking institutions] should be operating with a buffer of at least 3 percentage points over the loan interest rate,” the regulator warned in the letter.

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