The major bank and its subsidiaries have today announced fresh mortgage changes in an effort to meet regulatory requirements.
Westpac today announced that as of Monday, 5 June it will reduce the maximum LVR to 80 per cent on new and existing interest-only (IO) lending.
The maximum LVR (inclusive of any capped mortgage insurance premium) for customers making IO repayments will no longer be acceptable above 80 per cent. This applies to new loans (originations) and loan increases.
Westpac explained that this change applied to owner-occupier and investor loans, equity access loans, special borrower packages (medico and other industry specialisations) and staff home loan benefits.
The only allowable exceptions are:
- Building/construction loans where interest-only is available during the construction period before reverting to principal and interest repayments.
- Parental Leave where interest-only is available for a maximum 12-month period and the loan will then revert to principal and interest
- Bridging loans
“We are committed to meeting our regulatory requirements, and ensuring we are lending responsibly and in the best interests of our customers. We regularly review our polices and processes based on a number of factors such as the impact of regulatory requirements and the economic environment,” the bank explained in a note to brokers.
“Today, we are announcing some policy changes to our interest-only lending policies. These changes will help us continue to meet our regulatory requirements and apply responsible lending practices in assessing a customer's ability to service existing and proposed debts.”
Effective 5 June, new stand-alone refinance applications of an external provider for owner-occupier interest-only home loans will no longer be accepted.
“Internal refinance of owner-occupier interest-only is still allowable subject to maximum LVR requirements and the suitability based on the customer’s requirements and objectives,” the bank said.
“Customers making interest-only repayments who want to move to principal and interest repayments can do so without paying a switching fee. Premier Advantage Package customers can switch at any time at no additional cost.”