Forums / Getting Technical / Finance / Interest Rate

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  • Profile photo of SchnakeSchnake
    Participant
    @schnake
    Join Date: 2014
    Post Count: 11

    Hi All,

    What do most banks/lenders use as their interest rate when assessing a customers ability to repay a loan against other expenses? It’s been a while since I have noodled in this space, so I’m wanting to get an idea to see how much things have changed as APRA have changed the rules.

    (For reference, the last time I enquired it was ~2% above their standard variable rate).

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    In the main 7.25% on both existing & new debt but there are a number of differences in the interpretation.

    Odd second tier lender still working off actuals for existing debt but a dying breed.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of SchnakeSchnake
    Participant
    @schnake
    Join Date: 2014
    Post Count: 11

    Thanks Richard. This allows me to calculate a few things for myself.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Agree with Richard – generally around the 7% mark

    Having said that – there are other factors involved when taking into account max borrowing for investors. Some lenders add back negative gearing, some take a higher percentage of rental income, some cap the yield….the list goes on.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of StevenSteven
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    @steven1982
    Join Date: 2017
    Post Count: 175

    You mean it is not just the new loan application that they will use 7%…

    Even the loans that were already approved at 4%, they will treat that as 7% as well?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Don’t forget most also factor in existing debts as PI over loan terms less the IO term.
    so if you had a 5 year IO term on a 30 year loan and then next day go and get a new loan, the first loan will be assessed as if it is a 25 year PI loan – usually at 7%+

    And that is why it is so hard to buy multiple properties quickly these days.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of George PoullosGeorge Poullos
    Participant
    @york-p
    Join Date: 2015
    Post Count: 10

    As being alluded to above, there are quite a few things that have changed in the last couple of years & are constantly changing as we speak. Assessment rates for existing debt, new debt, OFI debt, living expense calculations, P&I/IO debt assessment differences, margin lending debt to name a few.

    George Poullos | Precision Funding
    http://www.precisionfunding.com.au
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    Finance Strategist & JP

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