Westpac reduce Servicing Interest Rate

Effective from Tuesday 16 July 2019:

• The floor rate is decreasing to 5.75% p.a. from 7.25% p.a.
• The buffer rate is increasing to 2.50% p.a. from 2.25% p.a.

These changes will impact the Serviceability Assessment Rate (SAR) that is used for serviceability assessments. This may have a positive impact on the borrowing capacity of qualified borrowers.

 

There you go, another one of the major has moved soon after ANZ. Thanks for sharing Terry.

 

Let’s run bets on who will go next between CBA and NAB.

My money is on CBA

 

I'll say NAB, just because you said CBA

 

St George, part of westpac;\
Effective from Tuesday 16 July 2019:

• The floor rate is decreasing to 5.75% p.a. from 7.25% p.a.
• The buffer rate is increasing to 2.50% p.a. from 2.25% p.a.
• St.George will now service Fixed Rate Home Loans on the Variable Revert Rate.

These changes will impact the benchmark rate that is used for serviceability assessment. This may have a positive impact on the borrowing capacity of qualified borrowers. ApplyOnline will be updated to reflect this change.

Floor and Buffer rate

• If the variable rate applying to the proposed loan plus the interest rate buffer of 2.50% p.a. is less than the floor rate, then the floor rate is applied as the benchmark rate.
• If the variable rate applying to the proposed loan plus the interest rate buffer of 2.50% p.a. is greater than the floor rate, then the rate on the loan plus the interest rate buffer is applied as the benchmark rate.

 

This table might help... it provides some examples

Notice that the fixed rate is not used. It's the revert to variable rate + 2.5% that will be used.

Most O/Occ P&I variable rate deals sitting between the 3.3% and 3.6% range after the July rate cut, will end up being assessed at around the 5.8% - 6.1% range

 

From the Dragon

 

If they aren’t using the fixed rate, what’s the N/A about? I’m sure someone on here will check, but it looks similar to their old old policy of using fixed rate as sensitised rate when more than a 3 year term....otherwise the 3 and 4 year examples would have a similar ‘SAR’ rate to the 2 year fixed example I would have thought.

 

It's worth noting that nobody in the Westpac group appears to be offering a variable rate of 3.10%. Not even close.

Their treatment of fixed rates is downright awful, as is their supposed package rates and discounts. A couple of rate increases and serviceability will actually be worse under these policies.

Westpac is taking a fairly conservative approach to this policy, which isn't unexpected. It's also going to lead to a lot of errors as loan officers now have to figure out assessment rates for every possible loan.

 

The N/A sits under the Variable Rate examples. There is no "revert to " rate for a loan that's already variable

For all the fixed rate examples there is a "revert to" rate and the 2.5% is added to them.

 

I have a WBC loan at 3.38% P&I at the moment so I should be assessed at 5.88%, which is only 13 bpts above their floor rate. We would need another 25 bpts cash rate reduction and I would personally need 13 bpts passed through in order to reach the 5.75% floor rate.

Let's pretend the loan is at ANZ for a moment at 3.38% P&I. I'd need 38 bpts in reductions ( 2 x 19 bpts for example) in order to reach their floor rate of 5.5% . I dont think anyone's going to be giving ANZ's floor rate a nudge unless the RBA takes us down to a cash rate of 0.5%

 

Yep, ANZ's floor won't be used really, until theres a rate cut or two. I.e. its leaving the potential for further rate cuts to further boost borrowing power.

Westpac's floor probably needs one rate cut to be met (or a very good discount).

 

https://www.smh.com.au/business/ban...imits-for-home-borrowers-20190711-p526eh.html

ANZ 5.5%

 

Here comes price rises again!