Westpac Group has announced that it will reduce its interest rate floor for home loan serviceability assessments from 7.25 per cent to 5.75 per cent and increase its buffer from 2.25 per cent to 2.5 per cent.
The changes, which will be effective for new applications from Tuesday, 16 July, have come in response to the Australian Prudential Regulation Authority’s (APRA) decision to scrap its 7 per cent interest floor and raise its buffer to 2.5 per cent.
This marks the second time Westpac announced revisions to its policy over the past month, after it sought to preemptively amend its guidelines before the reforms were finalised.
The bank had initially announced that it would allow its credit officers to use their discretion when assessing low-risk home loan applications that did not pass the serviceability test, but reversed its decision after holding discussions with APRA.
Westpac has become the second big four bank to officially amend its serviceability policy, after ANZ announced last week that it would reduce its interest rate floor to 5.5 per cent and increase its buffer to 2.5 per cent.
The CBA and NAB have each told Mortgage Business that they’re currently in the process of reviewing their respective policies.
[Related: Major bank lowers serviceability floor]