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Major bank overhauls guarantor policy

by Charbel Kadib10 minute read
Major bank overhauls guarantor policy

A big four bank has broadened the list of acceptable family members and loan purposes under its guarantee policy for mortgage applications.

Westpac Group – which includes the Bank of Melbourne, BankSA and St.George Bank – has announced changes to its guarantee policy for home loan applications, which includes an expansion of eligibility criteria.

Effective for applications submitted from 5 July, the list of acceptable family members who can provide a “Family Security Guarantee” now includes:

  • parents, step-parents and legal guardians
  • siblings or step-siblings
  • children or stepchildren

Westpac has also expanded the range of acceptable loan purposes for guarantor applications to include refinances and home improvements, provided they are funded via progressive drawdowns.  


Guarantee applications may now also be supported by first and second mortgages unless:

  • the first mortgage is a reverse mortgage facility; or
  • lender’s mortgage insurance (IMI) is required for the second mortgage, and the first mortgage is not held by Westpac.

Westpac added that short-term valuations will now be mandatory for all LMI-backed securities.

These are the latest of a number of credit policy changes introduced by Westpac over the past few months.

However, most of the revisions have involved a tightening of the bank’s serviceability policy, in response to credit policy risks associated with the economic fallout from COVID-19.

Specifically, the changes include heightened income verification requirements, reductions to the maximum LVR for self-employed borrowers, and the withdrawal of LMI waivers for the industry specialisation sector and the sports and entertainment industries.  

Westpac has fallen behind its peers in the mortgage market in recent months, with the latest statistics from the Australian Prudential Regulation Authority (APRA) revealing that Westpac was the only big four bank to record a contraction in its home loan portfolio in May.

Westpac’s book contracted by approximately $500 million, from $406.8 billion to $406.3 billion. This followed a $1.2-billion contraction in April.

This has coincided with a sharp decline in the percentage of brokers lodging mortgage applications with Westpac and its subsidiaries, with Momentum Intelligence’s latest Broker Pulse data reporting that broker usage slipped from a 2020 peak of 56 per cent in March to 41 per cent in May.

[Related: Approval lags, credit crunch, chief pain points among brokers]


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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