Westpac’s reduction of its maximum LVR for new customers is consistent with its strategic focus on building stronger relationships with its pre-existing customers, according to a bank spokesperson.
The major yesterday announced it would drop its top LVRs for new business to 87 per cent from 97 per cent.
“We are a relationship bank and these changes will allow us to be even more responsive to the requirements of our existing customers,” a Westpac spokesperson told The Adviser.
“This decision also reflects our desire to be a bank that has a multi-product relationship with customers and can continue to support the very different banking requirements of our existing customers.”
The move from Westpac has sparked industry fears that others lenders may follow suit, further impacting brokers and their clients.
National Mortgage Brokers’ managing director Gerald Foley told The Adviser that Westpac’s decision to lower its LVRs for new customers could have a negative long term impact on his business.
“While the direct impact is fairly minimal, my concern is that Westpac’s decision to lower its LVRs with certain customers could create a dominoes effect among the other lenders,” Mr Foley said.
“Westpac could lose some business to other lenders, which could then force those lenders to reduce their LVRs in order to curb the burden of extra borrowers.”
But while the long term impact of Westpac’s decision could hurt his bottom line, Mr Foley said the major’s decision to ease back its lending had not come as a surprise.
“Funding costs are putting an increasing amount of pressure on the majors and this is the way Westpac has decided to deal with the pressure,” he said.
Mortgage Choice chief executive officer Michael Russell agreed that Westpac’s decision to tighten credit was in response to increasing funding pressure.
“I think we will see them ease back on credit now, and then rebuild their loan book and LVRs as the economy returns to more normal footing,” Mr Russell told The Adviser.