Slamming the breaks on home lending unjustified
A decision by Westpac to slam the brakes on home lending after it tightened credit policies to curtail lending to borrowers heavily exposed to the impact of the economic lockdown, has been viewed as unjustified by a Port Douglas realtor.
On Monday, the bank revealed details of the new policy in a notification sent to mortgage brokers.
And in a report that appeared in Banking Day, it stated that borrowers in tourism hotspots, such as Port Douglas in Queensland and Byron Bay in NSW, are now required to stump up deposits of at least 30 per cent of the value of a residential property to be eligible for a home loan.
Steve Doble, who handles property sales and marketing in LJ Hooker's Port Douglas office, said this was an “interesting” move. And did he think it was justified: “I don’t think so,” he said.
From 17 May, Westpac will cease accepting loan applications from a swathe of potential borrowers, including small business owners and independent tradespeople who want to fund 80 per cent or more of a residential property purchase through credit.
The new restrictive policy will also apply to all loan assessments for borrowers who generate income from a mix of independent business activity and pay-as-you-go employment at another business.
Westpac and its regional banking brands – St George, Bank of Melbourne and Bank SA – are also reining in lending to borrowers in suburban and regional areas most affected by the sudden collapse in tourism activity caused by the Covid-19 lockdown measures, the report said.
“Borrowers in tourism hotspots, such as Port Douglas in Queensland and Byron Bay in NSW, are now required to stump up deposits of at least 30 per cent of the value of a residential property to be eligible for a home loan.
“However, the wording of the memo has stoked conjecture among brokers that Westpac’s ultra-cautious approach was triggered by moves from reinsurers to withdraw from covering the default risks of home borrowers with small deposits.
“Westpac self-insures its mortgage default risks through a captive vehicle, but farms out its LMI exposure to a panel of reinsurers, which includes the Bermudan-based Arch Capital Group,” the article states.
The bank relocated parts of its mortgage processing and settlement activities overseas in the last decade but those operations have been severely disrupted due to lockdown measures in India and The Philippines.
Independent and objective, Banking Day is a unique information service, supplying news, analysis and commentary on banking and financial services with a focus on Australia and also New Zealand.
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