Westpac slices off a head of APRA wet lettuce

Via the AFR:

Westpac has unleashed a fresh wave of property lending by relaxing serviceability conditions on low risk home loans, immediately increasing the borrowing capacity of aspiring home owners by as much as 8 per cent.

A spokesman for Westpac confirmed the policy change saying credit officers would now have the discretion to approve principal and interest loans to owner occupiers who previously fell just outside lending parameters.

Let’s not forget that the change in the buffer was “proposed”:

The Australian Prudential Regulation Authority (APRA) has begun consulting on possible revisions to its guidance on the serviceability assessments that authorised deposit-taking institutions (ADIs) perform on residential mortgage loan applications.

In a letter to ADIs issued today, APRA has proposed removing its guidance that ADIs should assess whether borrowers can afford their repayment obligations using a minimum interest rate of at least 7 per cent. Instead, ADIs would be permitted to review and set their own minimum interest rate floor for use in serviceability assessments.

APRA has also proposed that ADIs’ serviceability assessments incorporate an interest rate buffer of 2.5 per cent. Currently, APRA expects ADIs to assess loan serviceability using the higher of either (i) an interest rate floor of at least 7 per cent, or (ii) a 2 per cent buffer over the loan’s interest rate. APRA’s guidance also indicates that a prudent ADI should use rates comfortably above these minima; most ADIs use 7.25 per cent and 2.25 per cent respectively.

“Proposed” no longer. Bring on the wet lettuce.

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