The strong growth in home loans activity shows no sign of slowing.
Borrowers signed up for $27.64 billion of new home loans in March, which was 3.1% higher than the previous month and 17.9% higher than the previous year, according to the latest data from the Australian Bureau of Statistics.
Owner-occupied loans rose 11.4% to $17.48 billion, while investment loans surged 31.1% to $10.17 billion.
When you apply for a mortgage, lenders assess your ability to repay the loan not at the actual interest rate, but the interest rate plus a buffer of at least 3 percentage points. So a loan with an interest rate of, say, 6.50% would be assessed at a minimum of 9.50%.
This buffer is applied so that borrowers have greater capacity to make their mortgage repayments if interest rates rise or their financial circumstances deteriorate.
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