Major home loan crackdown announced – here’s how it could make it harder to get a mortgage

Australian borrowers will soon have a tougher time getting a new home loan with the banking regulator announcing new rules to tackle the surge in debt levels.

National property prices in September soared by 20.3 per cent – the fastest annual pace since 1989.

The Australian Prudential Regulation Authority,  the banking regulator, on Wednesday announced new stricter lending rules with typical homes even outside Sydney and Melbourne unaffordable for ordinary borrowers. 

Under the new rules, the banks will have to model how a borrower would cope with mortgage rates climbing by three percentage points.

The big banks are now offering fixed mortgage rates of 2 per cent and the Reserve Bank of Australia has vowed to keep the cash rate at a record low of 0.1 per cent until 2024. 

Australians on an average, full-time salary of $90,329 would now have a debt-to-income ratio of six just to buy a median-priced $674,848 home with a 20 per cent deposit factored in, CoreLogic data shows. 

Someone earning that salary now buying a typical Australian home, with a 2.19 per cent fixed mortgage, would be paying $2,048 a month in mortgage repayments.  

Under the APRA changes, the banks would have to model how this borrower would cope with the mortgage rate going up to 5.19 per cent, which would see their monthly repayments climb to $2,962 or $914 a month.