Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

CBA lowers home loan buffer rates for some refinancing clients to 1%

Published 06/21/2023, 02:22 AM
Updated 06/21/2023, 03:55 AM
© Reuters. FILE PHOTO: A Commonwealth Bank of Australia logo adorns the wall of a branch in Sydney, Australia, May 8, 2017. REUTERS/David Gray/File Photo
WBK
-

(Reuters) -Commonwealth Bank of Australia on Wednesday cut its buffer rate for some borrowers refinancing their existing home loan to 1% from the industry standard of 3%, providing relief to many clients who would otherwise fail to qualify due to high interest rates.

The country's prudential regulator advises lenders to refinance home loans only if they believe the customer could repay at 3% higher than current market rates.

While CBA's alternate buffer is not in line with the regulator's recommendation, it does not break the serviceability buffer, the regulator said, as it allows exceptions to the policy but warns against high volumes.

CBA has a quarter of the Australian mortgage market, where thousands of borrowers are expected to end their fixed rate loans this year, forcing them to shop around for new loans at current rates.

The Australian Prudential Regulation Authority (APRA) in a letter earlier this month said banks could face heightened supervisory attention if they report large volumes of policy exceptions which could pose risks to the banks' loan books.

Starting Friday, CBA will allow select customers who meet some "strict eligibility criteria" to refinance their loans if they are capable of repaying at 1% above current market rates, the bank said, adding that a track record of no missed payments for at least a year was among several criteria for customers to be considered eligible.

"We know that due to the current interest rate environment some home owners are facing challenges refinancing their home loans so we are introducing an alternate interest rate serviceability buffer," CBA's Michael Baumann, executive general manager home buying said.

© Reuters. FILE PHOTO: A Commonwealth Bank of Australia logo adorns the wall of a branch in Sydney, Australia, May 8, 2017. REUTERS/David Gray/File Photo

Westpac Banking (NYSE:WBK) Corp, the country's second-biggest mortgage provider, also offers modified serviceability assessment rate to customers unable to meet the industry standard.

The Reserve Bank of Australia has raised interest rates by 400 basis points to an 11-year high of 4.1% since May last year.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.