The major bank has amended its residential lending policy to reflect changes in its economic outlook amid the ongoing COVID-19 crisis.
Westpac Group – which includes subsidiaries Bank of Melbourne, BankSA and St.George Bank – has announced changes to its consumer credit policy, effective Thursday, 30 April.
The revisions include the withdrawal of lender’s mortgage insurance (LMI) waivers and the tightening of income verification requirements for new lending.
Withdrawal of LMI waiver
Westpac has informed brokers that its LMI waiver offering, available for loans with an LVR of up to 90 per cent, has been withdrawn for the industry specialisation sector and the sports and entertainment sector.
Moreover, the threshold for LMI fee waivers for qualifying medical professionals has been reduced from a maximum LVR of 90 per cent to a maximum LVR of 85 per cent.
Westpac has also announced that it will now require borrowers to provide more recent proof of income for the serviceability assessment.
For loans submitted from 30 April, the latest payslip or alternative documentation for proof of income must be no more than two weeks old or one month for monthly pay cycles.
Applicants who are unable to provide the latest proof of income due to self-isolation are required to provide supplementary evidence (i.e. salary credits) that matches the profile of older payslips.
According to Westpac, these latest credit policy changes were made to ensure the bank is “lending responsibly” in the current environment, adding that they “reflect recent changes to the global and domestic economic outlook as a result of the COVID-19 pandemic”.
“We remain committed to helping our customers purchase their next property, and these changes will help us continue to do this in a responsible and sustainable way,” Westpac told brokers.
Westpac is the latest among several lenders, including NAB, Bankwest, ING, Gateway Bank, MyState Bank, Heritage Bank, ME Bank and a number of non-banks, to tighten serviceability standards for new lending amid forecasts of a spike in defaults.
Other stakeholders in the lending industry have also adjusted their risk appetites, with mortgage insurer QBE Australia imposing an “embargo” on the provision of lender’s mortgage insurance to borrowers employed in industries hardest hit by the outbreak.
Deposit bond provider Deposit Power has also revised its underwriting policy for short-term deposit guarantees, doubling the equity requirement for home equity products from one to two times the deposit amount.
[Related: Westpac amends loan approval process]