Westpac backflips on investor crackdown
A major bank has partially walked back its crackdown on property investors.
After restricting loan-to-value ratios (LVRs) for property investors, Westpac has told brokers it will lift the maximum LVR on investment loans from 80% to 90%, the Sydney Morning Herald has reported.
Banks tightened lending to investors in response to APRA’s request for investor credit to remain below 10% of banks’ total loan book. Major banks, including Westpac, have also cut lending to foreign buyers. The bank announced last month it would stop residential property lending to non-residents and temporary visa holders, and would limit LVRs to 70% for home loan applications listing foreign income.
Watermark Funds Management investment analyst Omkar Joshi told the SMH Westpac’s move to raise LVRs shows the bank trying to strike a prudential balance.
“It probably just tells you they maybe went a bit too far the first time around. If the banks all [restrict investment lending] at the same time, it does create a bit of a problem for the market,” Joshi said.
The changes could help quell fears that off-the-plan buyers could face difficulty when they reach settlement, with banks unwilling to lend enough to cover their initial contracts. Joshi said settlement problems for off-the-plan buyers could have caused financial difficulties for property developers, leading to a rise of bad loans for banks.