SYDNEY : Australia's banking regulator on Wednesday tightened restrictions on home lending as rapid loan growth fed surging prices and posed a risk to financial stability.
APRA said it told lenders it expects they will assess new borrowers' ability to meet their loan repayments at an interest rate that is at least 3.0 percentage points above the loan product rate. This compares to the current buffer of 2.5 percentage points. With record low interest rates and a central bank reluctant to raise the cash rate from 0.1per cent until 2024, Australia's house prices have risen sharply this year, leading to much angst about affordability and debt.
"With the economy expected to bounce back as lockdowns begin to be lifted around the country, the balance of risks is such that stronger serviceability standards are warranted," Byres said.
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