Make sure you’re borrowing what you can afford

RACQ Bank has warned home loan borrowers continued to face increased scrutiny of their spending habits following the Hayne Royal Commission.

Property website Domain has reported new data from comparison site Lendi found banks had put the expenses of applicants under the microscope when they determined how much they could borrow.

RACQ spokesperson Lucinda Ross said Australian Prudential Regulation Authority (APRA) changes to how loan applications were appraised was a ‘double edged sword’ for borrowers.

“APRA recently loosened restrictions on how banks decide how much they’ll lend someone applying for a loan,” Ms Ross said.

“This means members might be able to borrow thousands of dollars more than they could before, but it doesn’t necessarily mean they should.

“Banks are now paying greater attention to where else you spend your money. Discretionary spending on Spotify and gym memberships will be looked at closely while your power bill, school fees and even how many pets you have are considered when deciding what they believe you can afford to repay.”

Ms Ross said RACQ Bank assessed every home loan to help members avoid overextending themselves financially.

“We want to work with you to make sure you and your family have the right amount of debt your income can afford,” she said.

“It’s important to realise while repayments are currently low, they won’t stay that way forever. We want to make sure you can cover your costs when rates go up without your lifestyle being adversely impacted.”