Westpac introduces tighter COVID-19 credit policies

Westpac is introducing tighter credit policies, making changes that will affect doctors, accountants and lawyers.

Accountant, lawyers and other professionals have been hit by changes made to credit rules by Westpac. Picture: Supplied.

Westpac is introducing tighter credit policies during the COVID-19 economic turmoil, including scrapping a more favourable industry policy for accountants and lawyers and reining in what it offers medical professionals.

An email sent to mortgage brokers, and obtained by The Australian, outlines the changes at Westpac and its subsidiary St George which come into effect this week.

The email said the bank was ending its industry specialisation lender’s mortgage insurance waiver, meaning borrowers such as accountants and lawyers would now be subject to the same criteria as standard borrowers.

The policy had allowed those professions to borrow amounts of up to 90 per cent of the property’s value, without the need for mortgage insurance.

The bank is also making changes to its policy for medical professionals, even as many remain on the frontline fight against the pandemic.

The email said the waiving of lender’s mortgage insurance for new owner occupied and investor home loans for qualifying medical professionals was being restricted to those with a deposit of 15 per cent of the purchase price or more. That threshold had previously been at 10 per cent.

The changes are part of a wave being made across the big bank and non-bank lenders as they rein in risk during what is expected to be a deep recession, including a spike in loan losses.

A Westpac spokesman said: “We have made some temporary updates to our home lending policies to take into account recent changes in economic circumstances due to the COVID-19 pandemic.

“We remain committed to helping customers into their next home and these adjustments mean we can continue to lend to our customers in a responsible and sustainable way in the current environment.”

Separately on Tuesday, Westpac warned it was setting aside $1.6bn for expected loan losses “predominantly related” to the COVID-19 impact on its lending portfolios.

That is almost double the amount rival National Australia Bank provisioned for potential COVID-19 related loan losses on Monday, when it slashed its first-half dividend and also kicked off a $3.5bn capital raising.

For self-employed borrowers, Westpac wants mortgage brokers to talk to customers to garner whether they have been affected by the pandemic’s fallout and document the discussion in notes accompanying an online application.

The bank wants brokers to check if sales in the business activity statement (BAS) from the latest quarter are “greater than or equal to the comparative sales figures shown in the same quarter BAS of the prior year”. It also wants confirmation that the business continues to trade, there are no indicators it is in trouble such as dishonour fees, no evidence of undisclosed liabilities and that income has not reduced.

The big banks came under fire from the federal government last week for not being quick enough to approve and get 50 per cent government-guaranteed credit to small businesses waiting for JobKeeper payments to remunerate staff. They have now set up phone lines to prioritise those businesses.

The major lenders are all revisiting their credit policies as they balance thorough risk assessments with ensuring credit keeps flowing through the economy.

Earlier this month, ANZ alerted mortgage brokers that they had an additional set of questions to address for business and self-employed home loan applications.

It’s a COVID-19 checklist that is now overlaying the approval process.

Applicants must answer how their business has been affected by the pandemic and whether they have tapped into any government support measures for cash flow assistance or employee wages support.

Pepper Australia, Bluestone and La Trobe Financial are among non-bank lenders that have revised their credit assessment criteria in recent weeks.