ANALYSIS: Did the bank regulator slip up on its interest rate floor? And could it cost Australians their homes?
At the time it was introduced, the cash rate had already been at 2.5 per cent for well over a year and the RBA's measure of typical discounted variable mortgage rates was just above 5 per cent.
However, the cash rate was about to fall further and, without a floor, the serviceability test would fall with it.By then, discounted variable rates were around 4.5 per cent. Under a 2-percentage-point buffer without the floor, those borrowers would have been tested on a 6.5 per cent mortgage rate.The average discounted variable mortgage rate since the RBA's data began in June 2004 has been 5.59 per cent, with the highest rate at 8.
On recent history, a mortgage serviceability rate floor of 7 per cent already seems dangerously low — there was roughly a one-in-five chance of exceeding it in any given month, worse odds than Russian roulette.During the pandemic, the RBA slashed the cash rate to a record low of 0.1 per cent.
Philippines Latest News, Philippines Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
‘New reality’: Fewer Australians are against tennis star Novak Djokovic being allowed into the countryAustralians are also increasingly pessimistic about COVID-19 case numbers heading into Christmas, suggesting that they accept the virus will be with them for a longer period of time | Gallo_Ways
Read more »
‘New reality’: Fewer Australians are against tennis star Novak Djokovic being allowed into the countryThe number of Australians prepared to accept tennis champion Novak Djokovic playing in the Australian Open has doubled since January, but he is still supported by less than a third of people. | Anthony Galloway
Read more »
‘New reality’: Fewer Australians are against tennis star Novak Djokovic being allowed into the countryAn exclusive survey reveals more Australians are prepared to accept tennis champion Novak Djokovic playing in the Australian Open, but he is still supported by less than a third of people.
Read more »
Telstra apologises for accidentally leaking the data of thousands of customers onlineTelstra apologises to thousands of Australians whose details are published online accidentally by the communications giant.
Read more »
Tough road ahead: Self-driving cars are taking off in the US, but Australians might be waiting a while yetMore self-driving cars are hitting the road in America, letting drivers relax behind the wheel. But when will Australians be driven around by their own cars?
Read more »