Westpac clamps down on interest-only loans

Adam Smith 17 May 2017 NEWS

housing economic riskWestpac has become the second bank this week to make changes to its interest-only loan policy.

The Australian Financial Review reported yesterday that ANZ would change criteria related to interest-only lending, including requiring at least a 20% deposit. Westpac has closely followed suit, with News Corp reporting the major bank will restrict loan-to-value ratios (LVRs) on interest-only home loans.

According to News Corp, Westpac has released a note to brokers saying it will drop the maximum LVR for interest-only owner occupier loans to 90%. The maximum LVR was previously 95%.

The changes will apply to new and current loans customers applying for increases or loan top-ups.

“In this low rate environment we are offering competitive interest rates to customers who make principal and interest repayments to encourage them to pay down their mortgages and own their home sooner,” Westpac said in its note to brokers.

In March, the Australian Prudential Regulation Authority (APRA) announced it would take steps to curb interest-only lending. The regulator expects banks to place a 30% cap on new interest-only lending.

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4 Responses

  1. Default Gravatar
    NOLANJune 19, 2017

    How do I change from interest only loan to a principal & interest loan?

    • Default Gravatar
      LiezlJune 19, 2017

      Hi Nolan,

      To switch repayment types, you can call Westpac’s Mortgage Centre from 8 am to 8 pm, 7 days a week. You’ll get a letter later on to confirm the change.

      Cheers,
      Liezl

    • Default Gravatar
      NOLANJune 19, 2017

      Do I have to apply for a new loan or do they just transfer my loan over?
      Are there any costs involved?

    • Default Gravatar
      LiezlJune 19, 2017

      Hi Nolan,

      You don’t have to apply for a new loan when requesting for a change in repayment type from interest only to principal and interest. As for fees it will attract, there was no mention of it on their website. I suggest you contact Westpac directly to ascertain this.

      Cheers,
      Liezl

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