AFG Home Loans launches Retro Switch with low serviceability buffer

AFG Home Loans has this week launched a new mortgage product that offers a more flexible way to refinance.

AFG Home Loans Retro Switch offers eligible AFG’s brokers’ customers dollar-for-dollar refinancing of a home loan, which has competitive interest rates and is assessed using a reduced 1 per cent serviceability buffer – lower than the 3 per cent buffer that is typically applied by many lenders.

Eligibility criteria for refinancing applicants includes 12 months good repayment conduct on their home loan and other liabilities. They must also have had no significant change to their income in the last 12 months.

The maximum LVR is 80 percent, and the maximum loan amount is $1.5m. The product is available on an interest only, and principal and interest basis. The Retro Switch product also offers a simple fee structure.

Damian Percy, General Manager, AFG Securities, said providing an option for borrowers to improve their financial situation, was consistent with AFG’s purpose of creating a fairer financial future for all Australians.

“A 3 per cent serviceability buffer was appropriate when interest rates were at a record low. It was inevitable that interest rates would substantially rise at some point, and therefore a higher serviceability buffer was appropriate to test that borrowers could meet higher repayments under this scenario,” he said.

“But following 12 rate hikes by the Reserve Bank of Australia since May 2022, variable rate repayments have substantially increased and the ceiling is much closer. A 1 per cent serviceability buffer is a fairer level that achieves a balance between responsible lending and may help borrowers free up cash flow and improve their financial situation.”

The new Retro Switch mortgage also qualifies for AFG’s Plant-A-Tree program, meaning AFG will plant a tree for every Retro Switch home loan written, in partnership with Carbon Positive Australia.

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