first-home buyers

PHOTO: STUFF John Bolton says changes to the servicing rates have already made a big difference for first-home buyers.

Banks could take a more lenient approach to assessing whether borrowers can afford a mortgage, the Reserve Bank has suggested.

All banks use a test interest rate to determine whether borrowers can meet the repayments on loans they want to take out.

While not usually publicly disclosed, this rate is significantly higher than the retail rates that banks advertise.

At the moment, with home loan interest rates available in the mid-3 per cent range, banks test applications at about 7 per cent. This ensures that borrowers can cope with rates rising.