Australia’s lending rules have undergone a significant overhaul in recent times, and as a borrower, it’s essential to be aware of the changes. The Australian Prudential Regulation Authority (APRA) has introduced new lending rules to ensure that financial institutions operate within safe and sound lending practices. These new rules aim to protect borrowers from over-indebtedness and financial institutions from excessive risks.
The new lending rules require lenders to scrutinize borrowers’ expenses and income more closely than ever before. Under these rules, lenders are required to use more realistic expense benchmarks when assessing a borrower’s capacity to repay a loan. The new expense benchmarks are based on the household expenditure survey data, and they reflect the average amount Australians spend on various items such as food, clothing, and transport.
Additionally, the Commercial Private Lenders Sydney require lenders to be more stringent when assessing a borrower’s capacity to repay a loan. Lenders must now assess a borrower’s ability to repay a loan based on their current income and expenses. Lenders cannot assume that a borrower’s income will increase in the future, and they cannot rely on a borrower’s ability to repay a loan based on the property’s potential future value.
Furthermore, under the new lending rules, interest-only loans have been restricted. Borrowers can no longer take out an interest-only loan for more than five years. This rule has been introduced to prevent borrowers from accumulating excessive debt and to encourage them to pay off their loans faster.
Another significant change under the new lending rules is the way lenders assess interest-only loans. Lenders are now required to assess the borrower’s ability to repay the loan based on the principal and interest payments rather than just the interest payments.
The new lending rules also require lenders to have more robust serviceability assessments. This means that lenders must ensure that a borrower can still afford their loan if interest rates were to rise. The serviceability assessment must be based on a minimum interest rate of at least 2.5% above the current rate.
Finally, lenders must now conduct a credit assessment for all borrowers. Lenders must consider a borrower’s credit history and their capacity to repay the loan when assessing their creditworthiness. Lenders must also ensure that borrowers are not over-committed and that they can meet all their financial obligations.
At Archer Wealth, we understand that time is of the essence, which is why we offer fast and flexible lending solutions. We aim to make the lending process as smooth and straightforward as possible, with a focus on delivering a seamless customer experience.
If you’re a mortgage broker looking for funds for your clients, we can assist you in finding the right lending solution. We work closely with brokers to ensure that their clients receive the funds they need to achieve their financial goals.
So, if you’re looking for a private lender in Australia, consider Archer Wealth. We offer competitive interest rates, flexible lending solutions, and a focus on delivering a superior customer experience. Contact us today to learn more about how we can assist you in achieving your financial goals.
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