Westpac extends mortgage lifelines to stressed households

Westpac has set up new coronavirus assistance measures that will allow home-loan customers more flexibility on their repayments.

Westpac will allow customers affected customers to switch from principal and interest repayments to interest-only. Picture: David Geraghty / The Australian

Westpac has set up new coronavirus assistance measures that will allow home-loan customers more flexibility on the conditions of their mortgage repayments.

The country’s second-largest bank will allow customers financially impacted by COVID-19 to switch from principal and interest repayments to interest-only, or extend current interest-only loans for up to a year, without a serviceability assessment. It is the first of the big four to implement a support measure that enables customers to easily change their payment scheme, instead of initiating a complete loan deferral.

Customers will have the option of switching to interest-only for up to 12 months. Existing interest-only customers will be able to apply for an extension to their existing loans for up to one year — double the time allowed under the original assistance scheme.

Westpac general manager of home loans, Will Ranken, said the changes were intended to give customers the flexibility of still making payments, even if mortgage deferrals had been initiated.

Previously, the major banks had allowed customers to defer repayments on home loans, but the default COVID-19 assistance schemes had not enabled partial payments. “We recognise that many customers who have been financially impacted by COVID-19 still want the option of making some repayments during this time,” Mr Ranken said. “These changes mean it is now simpler for customers to apply to extend their interest-only loan term, or switch their repayments to interest only.”

More than 115,000 Westpac mortgage customers have applied for the bank’s home loan repayment deferral program. Westpac had previously implemented a three-month interest-free grace period for credit-card customers.

The big four have set aside billions for COVID-related bad debts, but Westpac’s provisions, at $1.62bn, are higher than its peers. CBA has set aside $1.5bn, ANZ $1bn andNAB 807m.