From 21 July, NAB will take a more flexible approach to stress tests on certain refinancing applications.

APRA recommends banks apply a 3% serviceability test before issuing a loan, meaning a borrower applying for a home loan at 5% p.a needs to demonstrate the ability to repay it at 8%.

With interest rates so high, this has been criticised as unnecessarily restrictive, trapping borrowers on a higher rate because they don't meet serviceability tests to refinance to more affordable repayments.

The regulator has backed its serviceability buffer, saying exceptions should be made in limited circumstances.

CBA and Westpac have already made similar announcements, leaving ANZ as the only one of Australia's big four banks to not announce flexibility within this context.

NAB customers will need at least 20% equity, and refinance to a principal and interest loan of similar or lower value.

However where NAB may differ from other banks is that its customers can take out an extra 1% of the loan size to cover refinancing costs, and extend the loan term in limited circumstances.

Refinancing could be worth more than $700 a month to the average Aussie mortgage holder, but strict serviceability tests prevent many borrowers from switching to lower rates.

NAB has not revealed the specifics of its updated stress tests, but say it will 'refresh' how it assesses certain borrowers.

"We will be refreshing our existing approach to support eligible refinance customers switch to NAB, who are considered a good credit risk but may not fully meet standard lending criteria," the bank said in an emailed statement to brokers.

More to come?

APRA Chairman John Lonsdale wrote to banks after Westpac and its subsidiaries announced reduced serviceability tests, warning APRA expects lenders to use exceptions in a 'prudent and limited' manner.

"In using exceptions, APRA expects banks to make a prudent assessment of repayment capacity so that there is a good outcome for borrowers and the financial system," Mr Lonsdale wrote.

"Prudent banks would have acceptable reasons and clear justifications for loans written outside policy."

In her appearance on the Savings Tip Jar podcast, CEO of the Australian Banking Association (ABA) Anna Bligh said while banks 'actively support' the buffer, some limited circumstances called for flexibility.

"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."


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured 4.6 Star Customer Ratings
  • No monthly or ongoing fees
  • Unlimited free redraw
  • No application fee
5.99% p.a.
5.90% p.a.
Principal & Interest
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
Principal & Interest
Featured Unlimited Redraws
  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

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