Own Bank of Queensland (ASX:BOQ) shares? Here’s what you should know about its home loans

The regional bank will change its way of assessing home loan applicants from tomorrow.

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A man in a suit looks serious while discussing business dealings with a couple as they sit around a computer at a desk in a bank home lending scenario.

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The Bank of Queensland Limited (ASX: BOQ) share price is down slightly today amid news that the regional bank will among the first financial institutions to introduce a new lending rule.

At the time of writing, the Bank of Queensland share price is down 0.44% to $8.95 apiece.

Bank of Queensland set to implement policy change

The assessment criteria on home loan applications will tighten up as Bank of Queensland and fellow peer, Westpac Banking Corp (ASX: WBC) become the first banks to implement the higher interest rate buffer recommended by the Australian Prudential Regulation Authority (APRA).

On 6 October, APRA announced a new policy requiring financial institutions to evaluate new borrowers at an interest rate that is 3% higher than the actual loan product rate. Originally, the prerequisite was 2.5%.

APRA’s aim is to reinforce the stability of the financial system and ensure customers can continue to manage their loan repayments should interest rates rise over the coming years.

The new loan buffer for both Bank of Queensland and Westpac will come into effect from tomorrow, 29 October.

In other banking news, the Commonwealth Bank of Australia (ASX: CBA) and ING recently cut their variable rates for new customers with larger deposits.

According to a report in The Age, 28 lenders have cut their variable rates in the past month. Some analysts say the trend in falling variable rates could nullify the impact of APRA’s newly increased interest rate buffer.

With mortgage competition expected to intensify, a price war between the major banks could loom.

According to the article, some analysts think APRA might have to bring in further rules to slow down the booming housing market.

Meantime, fixed interest rates are expected to rise as Australia moves into a post-COVID environment.

Bank of Queensland share price snapshot

Bank of Queensland shares have soared by more than 40% over the past 12 months. They are up almost 20% year to date.

While the Bank of Queensland share price has recovered to pre-pandemic levels, it is still a long way off its 2015 highs of $13.50.

Bank of Queensland commands a market capitalisation of $5.9 billion and has more than 640 million shares on issue.

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