Time to rethink APRA's 7.25% home loan serviceability restriction: ANZ boss

The ANZ boss Shayne Elliott says it's time for a rethink of APRA's 7.25% home serviceability restriction rate.

The current measure that banks apply is the benchmark mortgage rate plus 2.25 per cent, or 7.25 per cent, whichever is higher. 

The Commonwealth Bank of Australia (CBA) was the last of the big four to announce its heightened mortgage serviceability criteria in mid-2017.

But the banks are now feeling the pinch from APRAs serviceability restrictions that say borrowers must be able to handle a 7.25% repayment interest rate.

The banks are campaigning for it be relaxed as it's crimping their earnings.

"We had a floor like this before the APRA requirement, it's prudent... I'm just saying I think common sense says it should be relative to where the interest rate cycle is," Ellliott said yesterday.

“The lower interest rates get the less likely it is that rates are going to get to 7.25 per cent any time soon,” Mr Elliott said.

“At some point you need to rethink it … commonsense says it should be relative to where the interest rate cycle is.”

He also noted that ANZ went too far in scrutinising its new loans under a stricter interpretations of responsible lending standards.

It was now loosening its approach.

“This is a marathon, not a sprint,” Mr Elliott said of fine tuning the process and hiring more loan assessors. 

ANZ loan arrears rates remained at low levels with only tentative signs of stress - some 600 extra borrowers of their 1 million home loans - getting into hardship over the past year.