Westpac loosens HEM for specufestors

Via Banking Day:

Westpac has flipped another card in a bid to revive its anaemic mortgage business by loosening the household expenditure benchmark it uses to assess investment borrowers.

In a notification to brokers on Wednesday,  the bank said it was overhauling the formula used to determine the Household Expense Measure band for investors.

Under the previous policy adopted by the bank in May, borrowers reporting lower living and property management expenses than those implied in the HEM benchmark were assessed as if their living costs were higher.

However, Westpac told brokers that an immediate impact of the changes, which took effect on Wednesday, would be to increase the borrowing capacity of investors who already own an investment property.

“As a result of this policy change, your customers may experience an improvement in borrowing capacity,” the bank told brokers.

“In particular, a customer with an investment property or looking at purchasing an investment property who is currently reliant on HEM (that is the customer’s declared expenses are less than total HEM expenses).”

Just what we need more of, portfolio specufestors! This is the fifth loosening of WBC leding standards in recent weeks.

A pretty brazen move this, given the pending appeal of ASIC vs Westpac over the use of alleged predatory use of HEM in the last cycle.

It suggests firmly that mortgage demand is still weak.

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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