CBA lowers its home loan assessment rate

CBA lowers its home loan assessment rate
CBA lowers its home loan assessment rate

The Commonwealth Bank has surprised the market in lowering its home loan assessment rate.

The interest rate used to work out whether a customer can service the debt of the home loan if rates rise was 7.4%; but now that rate is 7.25%, according to Sophie Elsworth, the News Ltd personal finance writer.

The analysis from mortgage broking firm showed the drop to assessment rates applied to owner occupiers and investors.

However CBA has recently tightened other serviceability requirements including only allowing maximum loan-to-value borrowings of 95% for owner occupiers. 

It had previously allowed borrowings of up to 97% including the cost of mortgage insurance.

All home loan lenders assess a loan application using their own mortgage assessment rate, which is a buffer they add into the interest rate.
Both the lender and the borrower can have confidence that the loan repayments can be made without undue hardship.
The mortgage assessment rate varies between each lender, though typically from 1.0% to 2.5% above the variable rate.
This allows the lender to assess the borrower's ability to repay the loan, should the Reserve Bank cash rate rise during the term of the loan.
Home Loan

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