Westpac new tough rule

Westpac Group, the nation's second largest mortgage lender, is set to axe a range of higher risk mortgage products and prevent existing borrowers from switching into lower cost loans as it battles to meet tough regulatory controls on growth.

Westpac set to axe 'risky' property loans, raise rates and ban switches in bid to hit target

 

This paragraph is of concern

 

bloody hell.. is the world caving in on property investors or what?? Looks like my next investment will be in the ASX..

 

Investors will be like poor Oliver soon...

 

The question I have is, will investors with a mature portfolio be able to aggressively expand their current holdings during this period?

As for me I am still going to do some cosmetic renos to maximise my rental returns and be able to work on my detached garage to granny flat conversion to increase my cashflow if I am placed in a higher interest rate/ P+I loans.

 

I don't see anything in this article that gives me any concern. The 'high risk loans' specifically mentioned are line of credit loans, lo doc loans and smsf loans. Given the nature of these loans this announcement is hardly surprising.

It also mentions testing borrowers capacity to repay when switching to interest only loans. Brokers on this forum have been predicting about this for months now.

The final thing is verification of people's living expenses. Whilst this hasn't really been a forum topic, it's been heavily discussed within broker and banking circles. Many lenders are starting to require a rough budget/breakdown of people's expenses as part of the application.

This certainly shouldn't come as a surprise to any brokers here. I'd like to think we're all reasonably well prepared for all this as several lenders have already been doing all this for some time now.

The only thing that annoys me about it is Westpac will likely start asking for a lot more paperwork. To date they've been fairly reasonable about this, I expect them to now go completely over the top.

 

Based on my last few applications with them, they're already over the top. Frustrating! And not asking for it all at once, either.

 

True, but I predict that they're going to start asking for existing loan accounts credit card and transaction account statements (other than savings for the deposit). They'll then start analysing spending patterns and make up their own mind on peoples living expenses.

It's a lot of extra paperwork and a lot of extra work for everyone. There's also going to be more loans declined as a result.

 

Not just you - drip feeding requests, lots of errors etc.

 

I think a way around this is to show upfront evidence of ongoing savings. This could be a good antidote to an assessors overzealous living expense analytics, and if we present this upfront, it may mean slightly less scrutiny of living expenses. It's worth a shot

 

I think this is going through a lot of peoples minds. On the financial advice side we're been helping quite a few previously 100% property exposed clients to debt recycle the PPOR's and reinvest into shares to keep the overall portfolios growing in size despite the targeting of property based investors.

The key is to reach your long term goals (which for most of us is financial freedom) - as the market and regulations evolve we need to use any and all tools available to us to do this.

 

People with good cash flow and cash and low debt it walk in the park
I borrowed money with CBA not for properties but shares this time but negotiate they charge me the same rate as my mortgage and they have no issue, done and dust 48 hours

show them I have plenty of cash flow and asset and a load of cash in offset,
my mortgage repayment is 3 times the required amount, this borrow money I paid off with P&I and double the repayment, knock them out in a few years and repeat

Best time to be cash up, they love you they want your business above all else
kill two birds with one stone, borrower like me no worry about APRA limit and they can lend out as much as they want

 

I disagree @PandS ASIC has just put Westpac through the ringer over the issue of them not properly verifying borrowers living expenses. Westpac are going to be looking hard at this and they're going to be very sensitive about it. I expect other lenders will follow.

Living expenses feeds directly into lenders servicing calculators. All the cash flow and savings doesn't make any difference. If the servicing calculator says it doesn't service, they won't give you the money and the loan will need to be reduced.

Based on your comments, you probably have quite strong serviceability so this isn't a problem. It's a very different situation for a lot of borrowers however.


I think living expenses could be a serious problem for many borrowers in the future. Declaring a figure slightly above the minimum figure acceptable isn't going to work in the future, people may quite possibly have to submit a budget and have the track record to match. If lenders use what many people really spend, some of those people won't qualify for the loan.

 

That is true, I always plan for double the required repayment as a minimum, but on average 3 times I never ever let thing go down to the wire.

I am Hope for the best and prepare for the worst type of person

 

In the 1980s and 1990s and even up to 2005 the lending practices never allowed much of what is accepted as normal now. I think lenders are just returning to past practices and the days of free money have ended. Im not sure its short term either. Te ability to gear gearing has ended and will likely get further difficult

 

This will definitely become an issue for many who meet their commitments then spend the rest. Doesn't mean they cannot <easily> reduce their cost of living to accommodate a new commitment, but will the bank believe it?

 

Don't forget longer wait times! (...than they already are)

 

Will these new policies apply with St George also?

 

probably