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Major bank revises HEM calculator for investors

by Charbel Kadib11 minute read

The major bank has changed the way in which it determines HEM bands for customers, in a move which it has claimed would improve borrowing capacity for investors.

Westpac has informed brokers that for applications submitted from Wednesday, 6 November, it will deduct any investment property operating expenses or investment loan interest costs from a customer’s gross annual income and gross annual rental income when determining their HEM band.  

The bank stated that the change is designed to align its calculation to how the HEM value is determined for other income bands, and may result in an improvement in borrowing capacity for home loan customers, particularly for those with an investment property or looking at purchasing an investment property. 

The bank has updated its “Assess” calculator to reflect the new policy and will update the serviceability calculator in ApplyOnline on Tuesday, 19 November. 


Westpac noted that brokers are still required to make “appropriate inquiries into an applicant’s financial situation” and keep “records of reasonable adjustments to expenses”.

This follows an admission from Westpac CEO Brian Hartzer following the release of the bank’s full-year results (FY19) that a decline in Westpac’s mortgage volumes were partly attributable to “clunky” credit processes adopted by the lender.

Mr Hartzer made specific reference to an expense categorisation tool introduced by Westpac in FY19, which he said was not received well by the broker channel.

“There was a tool put out to brokers in particular around how we needed to collect [expenses] data,” he said.

“The tool was frankly pretty clunky, so we’ve gone back and reworked that. It’s a better experience now, and were seeing applications rise.”

The chief executive denied that implementation of the tool – which included a greater number of expense categories as part of the HEM assessment – was “rushed”.  

“I wouldnt describe it as rushed out; I would just say that we should have done a better job of thinking through how that was going to land for our broker partners in particular,” Mr Hartzer added.

“The crux of what this was about was the new expense tables involved more categories of expenses that we need to collect, so there was a change in the processes, and we just made that a bit harder than it needed to be. 

“We dont get it right all the time, but we got onto it pretty quickly, and we think weve fixed that now.”  

Westpac’s announcement is the latest of several changes to its credit policy in recent months, including a second reduction to its interest rate floor for home loan serviceability assessments, from 5.75 per cent to 5.35 per cent.

[Related: ‘Clunky’ HEM tool slashed broker volumes: Westpac]

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Charbel Kadib


Charbel Kadib is the news editor on The Adviser and Mortgage Business.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Email Charbel on: [email protected]

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