Borrowers could be forced to wait for loan approval as a result of tightened expense-to-income ratio thresholds at Westpac and its subsidiaries.
The revised approval procedure is backdated to include all applications submitted from 7 July 2017 and will apply to clients at Westpac, St George Bank and Bank SA.
In a note released on 31 July, Westpac advised brokers that, as a result of updated expense-to-income ratio requirements, applications that don’t meet the threshold “may not result in an approval decision straight away”.
“Declined applications will require a submission to credit team for assessment and must include an explanation for the high level of expenses and details of how the customer will meet loan obligations and manage expenses.”
The bank recommended brokers undertake a “thorough and exploratory conversation” about clients’ financial situations, expenses and liabilities, as well as “capture” all clients’ declared expenses and make sure that before signing, clients have reviewed the loan application thoroughly.
Applications submitted prior to 7 July will be subject to the standard pipeline application re-assessment criteria.
In May, a report by JCP Investment Partners quoted an anonymous Sydney broker as saying: “If we included private school fees and child care costs, there would be no borrow.”
The report went on to claim that expenses are “quite simply fudged. . . . The banks appear to have weakened underwriting standards to pursue the asset-backed lend – sustaining credit-fuelled house prices.”
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