Powered by MOMENTUM MEDIA
Mortgage business logo

Westpac expands interest-only offering

The major bank has introduced changes to its interest-only offering to assist borrowers seeking repayment relief amid the COVID-19 crisis.

Westpac has announced that eligible interest-only (IO) home loan customers can now apply for term extensions of up to 12 months.

Borrowers paying principal and interest (P&I) will also be permitted to switch to IO for a 12-month period.  

Will Ranken, Westpac general manager, home loans, said the changes are designed to provide additional repayment relief for mortgage customers amid the COVID-19 crisis.  

“We have had more than 115,000 customers defer mortgage repayments as part of our COVID-19 consumer support package,” he said.

“However, we recognise that many customers who have been financially impacted by COVID-19 still want the option of making some repayments during this time.

“These changes mean it is now simpler for customers to apply to extend their interest-only loan term or switch their repayments to interest-only.”

md discover

This comes amid calls for IO loan relief from policymakers, after the Australian Prudential Regulation Authority (APRA) issued new guidance around serviceability assessments for borrowers amid the COVID-19 crisis.

The regulator acknowledged that there may be “operational challenges” for ADIs in “evaluating the long-term impact of economic stress on borrowers due to COVID-19”.

APRA stressed that such challenges “should not prevent changes to loan conditions where these are otherwise assessed to be prudent”.

Accordingly, APRA revealed that while full serviceability assessments would continue to be required for new lending, it would temporarily ease guidance for changes to existing loan terms, including the conversion of a P&I loan to IO.     

“Over the next six months period, APRA therefore accepts that some ADIs may not be able to complete a full serviceability assessment for borrowers seeking a change in their loan conditions,” the regulator noted.

“Such changes may include converting from principal and interest to interest-only, or for the extension of a loan term.”

However, APRA noted that for conversions from P&I to IO “without a normal serviceability assessment”, it expects that IO terms “would not exceed 12 months”.

[Related: Responsible lending leeway ‘put to the test’ by COVID-19]

Share this article
brokerpulse

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

brokerpulse graph

What are the main barriers to securing a mortgage at the moment?