The Australian Prudential Regulation Authority will introduce tougher serviceability tests on home loans, which will make it harder for potential borrowers to get a mortgage.
This means by the end of October, the minimum interest rate buffer will be increased from 2.5 per cent to 3 per cent, leading to a reduction in borrowing capacity for home loan applicants.
APRA chairman Wayne Byers defends the move, saying the new regulations will reduce risks to currently indebted borrowers.