Test rates are below 7% - why that’s good news for home loan borrowers

The Reserve Bank cut the OCR last week, and while that’s good news for mortgage holders, here’s what we’re really watching:

• Most banks have already dropped their floating rates.

• More interestingly – we’ve just seen a bank drop its test rate to 6.75%.

That’s a big shift. (Test rates are used by banks to check if you could still afford your loan if rates went up — it’s like a financial stress test as part of the approval process). And just a year ago, most banks were stress-testing borrowers at 8.5% or higher, so this change means real increases in borrowing power.

But there’s a catch…

As test rates come down, the Reserve Bank’s new Debt-to-Income (DTI) restrictions are going to start to bite. These rules cap how much you can borrow based on your income – unless you're buying a new build.

That’s where the real opportunity is

New builds are exempt from both the Reserve Bank’s LVR and DTI restrictions.

That means higher borrowing potential, less red tape, and more flexibility – for both home buyers and investors.

At Colab, we specialise in new build lending. We love them not just for the finance advantages, but because they’re built to higher standards, meaning warmer, healthier homes with lower maintenance costs.

If you’re thinking about your next move, or just want to understand your options, we’d love to help.