NAB latest big bank to relax stress tests for certain refinancers
- NAB is the latest bank to announce it may relax serviceability stress tests.
- From 21 July, NAB will take a 'refreshed approach' to certain refinancing applications
- ANZ is now the only of Australia's big four banks yet to announce flexibility around the buffer.
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."
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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.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 5.95% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
