Westpac, BoQ will be first to raise buffer rates

Two banks will increase assessment requirements from Friday

Westpac, BoQ will be first to raise buffer rates

Westpac and Bank of Queensland will be the first banks to raise their home lending assessment buffers to comply with the Australian Prudential Regulation Authority’s recent changes.

APRA announced on Oct. 6 that it expected regulated lenders to measure loan applicants’ capacity to repay against a buffer three percentage points higher than the prevailing interest rate, according to a BankingDay report. Previously, APRA required lenders to assess borrowers against a 2.5% buffer.

Westpac and BoQ will begin using the 3% rate buffer on loans received starting Friday, BankingDay reported.

“The new buffer rate will be applied for any application received on or after Friday 20 October 2021,” Westpac said in a memo to brokers. “Applications received via ApplyOnline up to and including Thursday 28 October 2021 that are accompanied by standard supporting documents sufficient to allow the assessment of the application, will have the previous buffer rate of 2.50 per cent p.a. applied where pipeline policy is met.”

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The changes take effect simultaneously for Westpac’s regional brands, St George, Bank of Melbourne and Bank SA, BankingDay said.

BoQ will also launch the new buffer rate Friday, but has also told brokers that applications submitted by close of business Thursday that require reworking will be assessed under the 2.5% buffer, provided there is “no material change to the application.”

BoQ said “material changes” included increases in loan size and changes to loan security.