If record low interest rates weren't enough, your borrowing capacity just ballooned.
Borrowers will be able to ask for up to 14 per cent more on their home loan applications after APRA made good on its pre-election promise and scrapped the lending serviceability buffer on Friday. Instead, the banking regulator now requires lenders to ensure borrowers can repay their loans if interest rates are 2.5 per cent higher.
In so doing, APRA has unshackled the banks from having to apply an increasingly unrealistic 7 per cent serviceability buffer to loan applications in a record-low interest rate environment. The banks will be hoping the combination of more competitive lending products with loosened application assessment requirements will add volume to depleted loan books, and reduced profits resulting from pressure to pass on RBA-fueled savings to customers.
If the weekend's auction clearance rates are anything to go by, that's a solid hope. Sydney's preliminary clearance rate hit 78.2 per cent over the weekend - up from 72 per cent last week - and Melbourne's climbed to 70.3 per cent. SQM Research's Louis Christopher didn't go as far as echoing the excitement of agents proclaiming that FOMO had returned to the market, but he did confirm this is the start of a bona-fide recovery in the property market.
Opinions differ on what should happen next.
Last week, the federal government's $158 billion tax package was passed in-toto. We also saw calls from Reserve Bank governor Philip Lowe to Scott Morrison's band of merry tinkers to do more beyond these cuts, and pull its weight on stimulating the economy.
Results of an AFR reader poll released today reflect the view that the government's focus on surplus is misplaced; instead, 87 per cent of respondents think the government should go further into debt to fund new infrastructure projects to kick-start the economy.
The ABC is arguing today that tax relief is not enough to address the fact that Australia holds the dubious accolade of having the world's highest debt-to-income ratio, and that loosening of lending restrictions increases the risk of that situation worsening.
On the other hand, the ABC is also today lamenting the impact of low consumer confidence on our economy, and how last week's events will hopefully do something about that. Westpac's consumer confidence index is due out this coming Wednesday; lots of fingers and toes will be crossed in the hope that record-low interest rates and incoming tax relief result in an upward tick in willingness among Australians to spend and borrow.
Economists from Alphabeta and Market Economics are both arguing today that this will be enough, suggesting we should hold a spell before committing to more stimulus measures. The mandarins in Canberra will no doubt be listening to them with more than half an ear.