October 2021: APRA finally moves — serviceability buffer to 3.0%
APRA lifted the mortgage serviceability buffer from 2.5% to 3.0%. The first formal macroprudential brake of the cycle.
The mechanics
Banks had to assess borrowers' ability to service loans at the current rate plus 3.0 percentage points (up from 2.5pp). Maximum borrowing capacity for typical owner-occupiers fell roughly 5%. For investors using interest-only and rental shading, the impact was closer to 8%.
What I said on air
Sky News framed it as 'the end of the boom'. My view was narrower: it was the end of the easy-credit boom. The 2022 move would be supply-and-rates-driven, not credit-driven. The investors who had locked their facilities at higher LVRs before October retained optionality the rest of the market lost overnight.
Dax Stanley
Founder & Principal Strategist, Hera Property. #1 international bestselling author of Real Estate Investing Using ChatGPT.