Loan Servicability

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NAB made changes to its home loan serviceability assessment policy, dropping its interest-rate floor to 5.5 per cent and increasing its interest-rate buffer to 2.5 per cent.
The changes are effective for all new home loan applications from 5 August.
The changes came after APRA revised its home-lending guidance, abolishing the 7 per cent interest-rate floor for mortgage assessments and raising the buffer rate to 2.5 per cent.
It is the last of the Big Four to tweak its serviceability policy with the other three announcing revisions and cuts earlier in July.
NAB has matched ANZ’s rate floor of 5.5 per cent.
They beat out their Big Four peers CBA and Westpac, who dropped their floor rates to 5.75 per cent.
<a href="/news/westpac-immediately-relaxes-serviceability-conditions-on-low-risk-owner-occupier-home-loans">Westpac was the first of the Big four</a> to make the cut.
All four increased the buffer rate to 2.5 per cent.
<a href="/expert-insights/finance/macquarie-bank-cuts-interest-rate-floor-2-per-cent-cba-unmoved">Macquarie</a> currently has the lowest interest rate floor at 5.3 per cent.
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NAB last of the Big Four to cut interest rate floor

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The ANZ boss Shayne Elliott says it's time for a rethink of APRA's 7.25% home serviceability restriction rate.
The current measure that banks apply is the benchmark mortgage rate plus 2.25 per cent, or 7.25 per cent, whichever is higher. 
The Commonwealth Bank of Australia (CBA) was the last of the big four to announce its heightened mortgage serviceability criteria in mid-2017.
But the banks are now feeling the pinch from APRAs serviceability restrictions that say borrowers must be able to handle a 7.25% repayment interest rate.
The banks are campaigning for it be relaxed as it's crimping their earnings.
"We had a floor like this before the APRA requirement, it's prudent... I'm just saying I think common sense says it should be relative to where the interest rate cycle is," Ellliott said yesterday.
“The lower interest rates get the less likely it is that rates are going to get to 7.25 per cent any time soon,” Mr Elliott said.
“At some point you need to rethink it … commonsense says it should be relative to where the interest rate cycle is.”
He also noted that ANZ went too far in scrutinising its new loans under a stricter interpretations of responsible lending standards.
It was now loosening its approach.
“This is a marathon, not a sprint,” Mr Elliott said of fine tuning the process and hiring more loan assessors. 
ANZ loan arrears rates remained at low levels with only tentative signs of stress - some 600 extra borrowers of their 1 million home loans - getting into hardship over the past year.   
 
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