Westpac backflips on investor crackdown

Adam Smith 24 May 2016

Fall in capital city median house price REIAA 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.

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