Trending Financial News 8 July

Suddenly getting a home loan just got easier

The 7.25 per cent assessment for home loan applicants has been dropped by the Australian Prudential Regulatory Authority. Applicants for new home loans will now be assessed on their ability to repay their home loans if the interest rate was to increase by 2.5 per cent.

So a borrower applying for a $300,000, 25 year home loan at 3.5 per cent variable will pay monthly repayments around $1501 per month according to the InfoChoice home loan calculator. That borrower will be assessed on their ability to make repayments of $1933 per month if rates were to rise to 6.0 per cent.

Under the previous assessment, the borrower would have to show they could repay $2168 per month to get their loan application approved.

New rules mean bigger home loans for borrowers

New home loan application assessment guidelines issued by the banking industry regulator to lenders on Friday mean more borrowers can get approved and successful applicants can get approved for bigger loans.

UBS economist George Tharenou told Banking Day the change will add 8 per cent to the borrowing power of mortgage applicants.

However, these changes could be offset in part by tightening of expense calculations for loan applicants. Regulators are also considering changes to the limits placed on lenders relating to investors loans.

Aussie big banks told: “Change is needed”

Australia’s largest banks need to focus on their customers’ experiences if they want to build profits according to new research by Bain and Company. Australian banks have introduced many customer loyalty programs but most of these programs have failed according to the Bain research.

“Change is needed,” said Katrina Cuthell, a Bain partner.

Australian big bank executives are blind to the impact their decisions are having on customers and bank shareholders are yet to be convinced that making customers satisfied is a route to greater profits according to the Bain report.

The deeming rate ‘undermines the pension’ system

The Morrison government is considering a cut to the pension deeming rate which affects the payments of 770,000 Australians, mostly aged pensioners. The deeming rate is currently 3.25 per cent for investments or deposits over $51,200 and has not been adjusted since 2015, despite falling interest rates. A cut of one per cent in the deeming rate will cost the government budget about $1 billion over four years according to reports in Nine media today.

Lobby group Seniors Australia wants deeming rate decisions taken from politicians and handled independently. Ian Yates from the Council on the Ageing said the discretionary deeming rate undermines the pension system and is costing people money.

A 0.25 per cent in the deeming rate in 2015 delivered average extra payments of $83.20 per year to pensioners.

Heritage Bank adopts instant payments

Queensland based Heritage Bank has got out in front of many bigger bank competitors and migrated to the New Payments Platform providing customers with the ability to make instant payments to other financial institutions using a PayID or BSB and account number.

Heritage Bank CEO Peter Lock said: “We’re absolutely thrilled to offer NPP faster payments via our app.”

“Through NPP … our members have more freedom in how they send and receive money,” said Mr Lock, “And can easily keep track of how they stand financially in near real time.”