(Reuters) - Commonwealth Bank of Australia (AX:CBA) said on Friday it would ease mortgage lending rules for its customers starting July 22, joining some of its Big Four peers who have taken similar measures in a bid to revive a sluggish economy.
CBA, the country's biggest lender, said it would introduce a new 5.75% floor rate and 2.50% interest rate buffer, in line with the Australian Prudential (LON:PRU) Regulation Authority's (APRA's) instructions that are aimed at stabilizing house prices. CBA's rates are currently at 7.25% and 2.25%, respectively.
Earlier this month, the prudential regulator scrapped a minimum 7% interest testing rate for bank customers' loan applications.
"We welcomed APRA's decision to update its guidance relating to serviceability assessment rates," Dan Huggins, CBA's executive general manager, home buying, said in a statement.
Westpac Banking Corp (AX:WBC) and Australia and New Zealand Banking Group (AX:ANZ) this week began lowering the interest rate they use to stress test loan applications.
Following a protracted property downturn, Australia's central bank has indicated that house prices are now stabilizing and APRA's credit easing measure would likely lead to a boost in borrowing capacity for many new customers.