Maximum Borrowing Exposure and Lenders Ratios
To help mortgage borrowers succeed, lenders apply a maximum borrowing exposure limit. Keep in mind that the limit doubles as a regulatory measure imposed on financial institutions. Australia’s economy has seen severe fluctuations. When interest rates increase unexpectedly, it puts borrowers in bad situations.
All loan borrowers reach a point where they can’t handle additional debt, especially investors. If interest rates go against them, their debt becomes more expensive. When deals fall through or the market goes in the opposite direction, it creates a negative domino effect. The borrower loses their ability to borrow. However, the lender takes a significant financial hit too.
Financial regulations placed on lending institutions ensure that they follow ethical practices. Sometimes it’s better to reject an application than to place the applicant on a questionable loan.
The 2021 Australian housing market became overheated. To cool it down, the Reserve Bank of Australia intends to place stricter borrowing limits. If individuals stop borrowing, it forces the asking prices to drop. Salaries aren’t rising with prices. Therefore, it is logical to conclude that homebuyers are taking on more debt than they can realistically afford.
To discuss how maximum borrowing exposure impacts your ability to borrow, speak with our Mortgage House loan specialists. They discuss your options and the products available to you.
Maximum Borrowing Exposure Conclusion
The maximum borrowing exposure limits an individual’s debt. Mortgage House applies the limit the same way other financial institutions do. Individuals who intend to borrow more have options before submitting their applications. Our loan specialists walk you through them.