Former Australian Securities and Investments Commission chairman Greg Medcraft says the prudential regulator must “fine-tune” its use of a serviceability buffer in the mortgage market, suggesting the hurdle rate could be linked to the cash rate and automatically fall as official rates rise.
The Australian Prudential Regulation Authority has currently set the buffer at 3 per cent – meaning new home loan borrowers, or those looking to refinance, are currently being assessed at their ability to repay an interest rate of around 9 per cent.
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Campbell Kwan covers retail and consumer goods for The Australian Financial Review, based in the Sydney newsroom. Email Campbell at campbell.kwan@afr.com
James Eyers writes on banking, finance, payments, regulation and emerging technologies. Based in Sydney, he is a former legal and investment banking editor at the AFR and has been a business journalist for more than 20 years. Email James at jeyers@afr.com.au
