Westpac tightens home loan lending rules: What it means for customers

Multiple lenders including Westpac have tightened lending rules, making it more difficult to take out a home loan for properties in certain locations. Here’s what it means for you.

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Mortgage customers who have or buy property in holiday hot spots will find it harder to get a loan and so too will self-employed Australians.

One of the nation’s largest lenders, Westpac, announced a raft of changes that will impact those who are looking to take out loans with the big bank.

New locations have been added to the postcode restrictions for those seeking loans and it includes tourist hot spots like Port Douglas in Queensland.

Other locations impacted are scattered among NSW and WA.

Under the postcode restrictions customers must stump up to a 30 per cent deposit in order to get the green light on a loan product with the big bank.

The changes also have been implemented by Westpac’s subsidiary banks including St. George, Bank of Melbourne and BankSA and are effective from Sunday, May 17.

Borrowers will find it harder to get loans during the coronavirus pandemic as financial institutions toughen up borrowing rules.

A Westpac spokeswoman said the new rules were a result of the economic strain during the coronavirus pandemic and impact borrowers’ seeking credit.

“With recent changes to Australia’s economic outlook due to COVID-19 we are making some temporary adjustments to our home lending criteria,” she said in a statement.

“These updates will help reduce risk for home loan applicants in some affected industries and areas, through measures such as lowering the maximum loan to value ratio (LVR).

“We expect these will be short-term adjustments and we will continue to review our credit lending policy in-line with the changing environment.”

While in other changes announced by the Westpac and its subsidiary banks, self-employed borrowers will also find it tougher to get a loan.

From Sunday the maximum loan-to-value ratio will be 80 per cent on new loans meaning those working for themselves have to front up with at least a 20 per cent deposit.

But Home Loan Experts’ managing director Otto Dargan said it was not yet clear on exactly which postcodes had been restricted.

“We don’t know exactly which postcodes have been restricted however many lenders are being cautious in areas that have been economically impacted such as tourist towns,” he said.

“Realistically it’s just easy to apply with another lender that can assist and there’s many that can take a commonsense approach.”

Just last week the banking giant reported a cash profit fall of 70 per cent or $993 million because of hefty costs relating to bad debt’s including the money laundering scandal that hit the bank in 2019.
It will not pay a dividend next month because of the serious cash falls.

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Originally published as Westpac tightens home loan lending rules: What it means for customers