APRA set to increase the minimum interest rate buffer

The banking regulator, Australian Prudential Regulation Authority (APRA), is moving to tighten lending standards, increasing the minimum interest rate buffer from 2.4 % to 3%.  This will occur at the end of October this year.

This has come about since the Reserve Bank of Australia released data showing housing debt-to-income ratios reached a high of 102% for owner occupiers and yearly housing credit growth of 5.6% which was beyond the income growth of 1.6%.

In the short term, Red23 believes it will have little effect on the demand for housing, as demand for housing particularly in the greenfield areas remains strong.

It is a welcomed response to reduce rapid property price increases, however, it will have a negative effect on first home buyers who are already on the backfoot because of recent rapid price increases.

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