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Home loan borrowers get $100,000 boost, now that the election’s done

Couple signing contract. Source: Getty
Couple signing contract. Source: Getty

Home buyers have had a tonne of good news this year, from property prices dropping to new lows to the regulators easing up on lending rules following the election.

All this, combined with expected interest rate cuts from the Reserve Bank of Australia, will see home borrowers receive a $100,000 lending boost, the Sydney Morning Herald has reported.

Managing director of Independent Mortgage Planners, Craig Morgan, told Yahoo Finance that home borrowers were in for a treat if lenders choose to relax their standards to the maximum extent and if borrowers have no other debts.

Singles earning an $80,000 income will soon be able to borrow $567,000 (on the current 3.75 per cent interest rate) when the Australian Prudential Regulation Authority’s (APRA’s) proposed changes of lowering the minimum interest rate serviceability buffer come into effect.

That’s up from the previous maximum amount of $512,000. And, if interest rates are to fall to 3.25 per cent, that $567,000 figure will increase again to $598,000 loan.

Singles earning $120,000 can currently only borrow $811,000, but with APRA’s changes, that could soon be $899,000, or $949,000 if the interest rate drops.

Couples earning $80,000 each with no kids will be able to borrow up to $980,000 up from $884,000 if APRA’s changes proceed, or $1.034 million if the interest rate drops.

This is what it will look like:

The effects of an increased borrowing capacity on singles and couples. Source: Independent Mortgage Planners
The effects of an increased borrowing capacity on singles and couples. Source: Independent Mortgage Planners

Home-buyers are similarly rejoicing at the Coalition’s win and the effective end of Labor’s negative gearing and capital gains tax policy changes.

However, Morgan doesn’t believe the Coalition’s housing policy is going to be a big win for buyers and borrowers.

“I don’t see the First Home Saving Scheme having any significant effect on borrowing capacity or access to finance,” Morgan said.

While he says it could assist a small number of people in meeting lenders’ standards, they still won’t meet the mortgage insurer’s requirements.

“Largely, however, I see it doing little more than allowing a fortunate few to avoid LMI [lenders mortgage insurance] costs – which is, of course, nothing to be sneezed at,” he said.

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