{"id":41167,"date":"2022-12-12T16:17:48","date_gmt":"2022-12-12T03:17:48","guid":{"rendered":"https:\/\/propertynoise.co.nz\/au\/?p=41167"},"modified":"2022-12-12T16:17:48","modified_gmt":"2022-12-12T03:17:48","slug":"did-bank-regulator-apra-slip-up-on-its-interest-rate-floor-and-could-it-cost-australians-their-homes","status":"publish","type":"post","link":"https:\/\/propertynoise.co.nz\/au\/did-bank-regulator-apra-slip-up-on-its-interest-rate-floor-and-could-it-cost-australians-their-homes\/","title":{"rendered":"Did bank regulator APRA slip up on its interest rate floor? And could it cost Australians their homes?"},"content":{"rendered":"

PHOTO: Mortgage stress is on the rampant increase in Australia. FILE<\/strong><\/p>\n

Depending on how high interest rates go \u2014\u00a0and how bad the latest property bust gets \u2014\u00a0it could go down as among\u00a0the worst decisions in Australian financial regulatory history.<\/p>\n

No \u2014\u00a0unlike the media pack tearing shreds off Phil Lowe \u2014\u00a0I’m not talking about the Reserve Bank of Australia governor’s repeated statements that he expected rates would stay near zero until at least 2024.<\/p>\n

\"Jennifer<\/a><\/div>\n
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Construction of Jennifer Hawkins $30m mega-mansion begins<\/a><\/h2>\n<\/header>\n<\/div>\n

I’m talking about a much-less publicised action, before the pandemic, that allowed tens \u2014\u00a0if not hundreds \u2014\u00a0of thousands of borrowers to act on Lowe’s comments by borrowing much more than they could really afford.<\/p>\n

This is what went down.<\/p>\n

In the few days\u00a0immediately after\u00a0the re-election of Scott Morrison’s Coalition government in May 2019,\u00a0the bank regulator \u2014\u00a0\u00a0Australian Prudential Regulation Authority (APRA)\u2014\u00a0revealed its plan to ditch an interest rate floor on mortgage serviceability tests.<\/p>\n

More on serviceability tests,\u00a0the floor\u00a0and the mysterious beast that is APRA later.<\/p>\n

For now, suffice it to understand that this change meant people could borrow more than before the change.<\/p>\n

And removing the floor meant that the maximum amount home buyers could borrow would keep rising with every interest rate cut.<\/p>\n

So, does it make any sense whatsoever for APRA to have removed that floor just as the Reserve Bank started cutting rates again in 2019?<\/p>\n

\"Australian<\/a><\/div>\n
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Australia\u2019s property markets ranked hottest to coldest for 2023<\/a><\/h2>\n<\/header>\n<\/div>\n

Yes, it does \u2026\u00a0if you’re a bank, mortgage broker, property developer, real estate agent or anyone else who makes money from the buying and selling of homes, or the issuing of debt to do so.<\/p>\n

In 2019, Australia \u2014 and particularly the two most-expensive markets of Sydney and Melbourne \u2014 were at the depths of a property funk that had started when APRA, ASIC and then the Hayne banking royal commission had all tightened the screws on lending standards.<\/p>\n