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Banks Drop Exams: Easier Switching, No Proctologists!

Easier mortgage refinancing in Australia: Say goodbye to high-rate loans with new serviceability buffer changes.

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Gone are the days when swapping banks felt akin to a trip to the proctologist’s office, complete with the unease, discomfort, and of course, that infamous ‘exam'.

If you're a homeowner in Australia, you're in luck! New changes in serviceability buffers make it easier for you to say, "Hasta la vista, mortgage prison!"

What the Buffer's All About

The term 'serviceability buffer' might sound like a fancy cushion for your living room, but it’s a figure banks use to assess your ability to pay back your loan. In simpler terms, a bank slaps an extra interest rate percentage on your loan to test whether you can manage it if rates were to climb. The Australian Prudential Regulation Authority (APRA) had previously set a minimum serviceability buffer at 3% across new property purchases and refinancing your existing home loan, causing some borrowers to be trapped in high-rate loans they couldn't escape.

The Paradigm Shift

Fast forward to 2023, and lenders have finally caught on to the struggle. Perhaps they’re tired of playing the villain in everyone’s home loan horror story. These compassionate financial overlords are now willing to consider lower buffers for refinancing - some even going as low as 1% on special cases - to make it easier for "mortgage prisoners" to break free! If you’re a homeowner in Australia, you’re in luck! New changes in serviceability buffers make it easier for you to say, “Hasta la vista, mortgage prison!”

Be Wary, Be Wise

Now before you start dancing in the streets, it's crucial to understand that not everyone will make the cut. You still need to be a reliable borrower with a consistent income stream. In other words, lenders will give you the side-eye to make sure you're not planning to spend your mortgage payments to purchase monthly shipments of wagyu or mixed bottles of shiraz.

So, is this the end of the mortgage misery saga?

Perhaps for some. Is it the end of uncomfortable banking experiences that make you feel like you’ve just been through a medical procedure? One can only hope.

As a reminder you savvy home loan holder! Just a quick heads-up. Giving you a Fair Go is the main goal of the advice and guidance we offer in our Craggle Chronicles. Keep in mind that the information you are reading is general and not specific to your individual financial fingerprint. It can change the game to speak with a professional before making any significant financial decisions. Get the scoop from a licenced financial professional to be sure you're headed in the correct direction.

Explore your refinance options.png Disclaimer: The opinions expressed in this article are strictly for general informational and entertainment purposes only and should not be taken as financial advice or recommendations.

Written By

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Maxwell Mortgage

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