It was always going to end this way. They held on too long and now they’ll have to go all in. Via Damien Boey at Credit Suisse:
APRA has just announced that it will no longer mandate the banks to use of a minimum interest rate of 7% for loan serviceability assessments. Instead, they will be able to set their own threshold for rates, and effectively choose their own adventure.
A change in loan serviceability test was flagged in the press a few weeks ago. Apparently, senior officials of financial institutions had supported the amendments, although anecdotally, we understand that the change in rates threshold may not relax all the binding constraints on mortgage lending activity, given the many moving parts involved.
