What does an interest rate drop mean for your borrowing power?
When calculating your borrowing power banks use what is called an assessment rate. This is calculated by combining their current standard variable rate PLUS a buffer of roughly 2%-3% (calculated at each individual banks discretion). This is designed to help both the borrower and the lender in the event of interest rate fluctuations.
This means that lenders generally assess your borrowing power at a minimum interest rate of 5.5% even if your rate is much lower than this.
Lenders don’t advertise their assessment rates however as brokers we have a good understanding of how each lender assesses your borrowing power.
Get in touch today to find out how much you can borrow.