As of August 2024, many of the major banks and non bank lenders have decreased the lending test rate they use to calculate loan affordability. The decision was due to improving economic conditions, as proven by the OCR announcement from the Reserve Bank of New Zealand (RBNZ) in mid-August. The OCR was reduced to 5.25%, after sitting at 5.5% since May 2023. We expect more lenders to update their test rates as a result!
What is a lending test rate?
A lending test rate is the hypothetical interest rate used by a lender to stress test whether an applicant would be able to continue to make repayments should interest rates increase. The rate is determined by both current and projected market conditions. It is always higher than actual interest rates to ensure the loan remains affordable should interest rates go up. The higher the lending test rate, the less an applicant can borrow.
What are the changes to the lending test rates?
Prior to August, lending test rates had been sitting at around 8.95%. At least two main banks have decreased their test rates by 20 and 25 basis points, respectively. This means 0.2% and 0.25% have been knocked off their test rates. The percentages are small, but it means thousands more dollars to a borrower.
We’re here to get you the finance you need
With interest rates coming down, lending test rates decreasing, and changes to the Responsible Lending Code, conditions are improving for financing your first home, your next home, or an investment property.
Whatever your property goals, you don’t need to work out how to get finance. At Platinum Mortgages, we save you time, money and stress by assessing your situation and letting you know what is possible. We then find the most suitable lender and mortgage solution for you. Contact us today for a no-obligation chat.