From 23 June, refinancers who do not pass CommBank’s standard serviceability test on a 30-year loan term can be re-tested using the bank’s new ‘Refinance Alternate Assessment,’ provided it is above the bank’s floor rate which is currently 5.40%.

This includes a 1% point buffer compared to the 3% industry buffer guideline set by the Australian Prudential Regulation Authority (APRA).

This change comes as many borrowers, who took out loans during recent years, find themselves unable to refinance to a cheaper lender as they no longer meet the higher buffer hurdle following rapid interest rate increases. 

This issue has become known as a “mortgage prisoner.”

CommBank isn't the first to cut loan buffers. Westpac made a similar change to its buffers last month for customers unable to meet the industry standard.

Data from mortgage broking group Lendi estimated up to 30% more borrowers will now be able to refinance if serviceability restrictions are eased.

For example, if someone in late 2021 took out a home loan at 2.00% p.a. they would have likely been assessed on a rate to repay it at 5.00% p.a.

Now, if that home loan went up to 6.00% p.a. they might have been unable to refinance using a stress test of 9.00% p.a. but might be able to pass the test at 7.00% p.a.

CommBank serviceability easing: Which refinancers are eligible?

To qualify, refinance customers must have a loan to value ratio of at least 80% with no Lenders Mortgage Insurance (LMI), a good track record of paying down all existing debts in the past 12 months, and be refinancing to a principal and interest loan.

The refinanced loan must be more than a year old and must be refinanced back out to a 30-year term.

However, those borrowers must have no delinquency of payments across loans with CommBank or at other banks in the past 12 months.

The amount being refinanced cannot be greater than the existing loan, and the reduced buffer will not apply to guarantor or property share scenarios, bridging loans, construction loans, and any loans involving government guarantee schemes

The lender will also lock out borrowers seeking to refinance to consolidate unsecured debt.


Following Westpac’s stress test announcement, APRA Chairman John Lonsdale told banks only ‘exceptional and limited’ circumstances should see the buffer lowered. 

“It’s important that these loans are assessed on a case-by-case basis,” Mr Lonsdale said.

Australian Banking Association's CEO Anna Bligh told the Savings Tip Jar podcast that while banks 'actively support' the buffer, not applying it flexibly means trapping some customers in mortgage prison.

"Banks think that the serviceability buffer is actually a really important part of the credit assessment process, and they use it all the time," Ms Bligh said.

"Banks are saying in very limited circumstances, a customer that [the bank has] had for a long time, they've never missed a payment, they are a good credit risk, you know them and you know their performance, they are applying for the same loan for the same house at a reduced rate, then there should be some flexibility in the use of the buffer.

"Otherwise you just end up with a very perverse outcome, that in order to protect someone, you've locked them into a higher payment."

Read More: 'Limited circumstances' require serviceability buffer flexibility on refinances: ABA CEO


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