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Bank changes serviceability requirements

by Francesca Krakue5 minute read

A non-major bank has confirmed that its serviceability calculators have been updated to remove negative gearing tax benefits for customers who operate their investment property at a loss.

A Bankwest spokesperson confirmed yesterday that in line with regulatory guidance its serviceability calculators have been updated to remove negative gearing benefits, effective Friday 10 February 2017.

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“This change aligns Bankwest with industry best practice and guidance from regulators, specifically APG 223 within the Residential Mortgage Lending prudential practice guide,” the Bankwest spokesperson told The Adviser.

“For customers who operate their investment property at a loss, where the income of the investment property does not exceed the costs, the related tax benefit will no longer be included in Bankwest’s calculation for serviceability of the loan.”

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Bankwest explained that the changes impact all new applications involving an investment lending facility and any existing deals that may require a new serviceability calculation after 10 February 2017.

Meanwhile, a CBA spokesperson told The Adviser that it is “business as usual” at Australia’s biggest mortgage provider, and that the changes only relate to Bankwest.

However, given Bankwest’s lead on changes to property investor refinancing last week, and CBA’s decision to follow suit days after, the market will closely watch any announcements over the next week.

Further, given that CBA’s investor home loan portfolio is growing faster than any of its major bank peers, any remarks by CEO Ian Narev will be closely watched tomorrow when the bank releases its half-year results. 

Investor lending in the spotlight

APRA chairman Wayne Byres recently elaborated on the consequences for banks that exceed the 10 per cent annual growth benchmark for investor lending.

At the A50 Australian Economic Forum in Sydney last week, Mr Byres said that APRA has been keeping a close eye on mortgage lending, particularly the quality of new lending.

“We have lifted our supervisory intensity in a number of ways – collecting more data from lenders, putting the matter on the agenda of boards, establishing stronger lending standards that will serve to mitigate some of the risks from the current environment, and seeking in particular to moderate the rapid growth in lending to investors,” he said.

“These efforts are often tagged ‘macroprudential’, but in an environment of historically low interest rates, high household debt, relatively subdued wage growth, and strong competitive pressures, we see our role – in simple terms, seeking to make sure lenders continue to make sound loans to borrowers who can afford to pay them back — as really pretty basic bank supervision.”

Mr Byres said APRA’s recent efforts have generated a moderation in investor lending, which he noted was accelerating at double digit rates of growth but has now come back into single figures.

[Related: APRA: Direct 'competitive instincts' away from investors]  

 

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