October Wrap Up 2021

Greetings from Scoutable and welcome to our October Wrap Up.

The Australian Prudential Regulation Authority (APRA) announced higher stress testing for mortgage serviceability in October, which came into effect 1st November.


APRA increased the serviceability buffer as affordability has become a rising issue as has the likelihood of interest rates increasing in future years. APRA has stated that new floor rates would reduce people’s maximum borrowing capacity by approximately 5 per cent.

The stress test is to consider a borrower's ability to repay their loan at a higher interest rate. The stress test rate has increased from 2.5 per cent to 3 per cent. This means a bank must consider whether a borrower will still be able to afford repayments on a loan 3 percentage points above current rates. The serviceability rates of the big four banks (CBA, ANZ, Westpac and NAB) currently range from 4.95% (NAB) to 5.25% (CBA).

Let’s take a look at how the change affects a buyer's borrowing power.

According to RateCity, the big four banks have stated that loans with unconditional approval that have not yet settled will still be processed using the old serviceability test (2.5%). Also, they will continue to assess customers with pre-approval who have not yet bought a property using the old stress test, provided they buy and make a full loan application within 90 days (CBA, Westpac and NAB) and 120 days for ANZ.

If you would like to discuss the mortgage serviceability rates, or any general property questions, please get in touch.

Until next month,

Kellie Landrey | Principal Buyers Agent

PROPERTY OF THE MONTH

42 Station Street, Newtown

Newtown is located approximately 4km south-west of the Sydney CBD. The suburb is filled with a multitude of retail facilities along King Street and Enmore Road. The suburb is well serviced by public transport including a train station and bus network. Newtown is also in close proximity to Sydney University, UTS and RPA hospital. These factors attribute to making the area a great place to live and a smart investment opportunity.

42 Station Street is an excellent example of a beautiful terrace found in the area. The terrace is positioned on 183sqm of land, with a 6.5 metre frontage and 160sqm of internal space. The layout is over two levels, providing three bedrooms, two bathrooms, formal living area, eat-in kitchen and parking for two cars.

The property sold for $3,100,000 on the 29th October.

The rental guide was provided at $1,500 per week, placing a gross yield of 2.5%.

If you'd like to know more about this property or any others, please get in touch.