Australian banks can make exceptions for borrowers who don't meet the 3% serviceability applied above a mortgage interest rate, but this must be done prudently and in limited cases, the country's banking regulator says in a letter to lenders. APRA says it is aware that some banks have recently made changes to refinancing exceptions processes, and warns that large volumes could weaken risk profiles and increase future shock vulnerability. "Prudent banks would have acceptable reasons and clear justifications for loans written outside policy," says APRA, noting that it will monitor exception trends and may request extra information to assess risk management. "Banks reporting large volumes of policy exceptions will be subject to heightened supervisory attention," APRA says. (alice.uribe@wsj.com)

Source: Wall Street Journal June 09, 2023 00:38 UTC