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Following in the footsteps of ANZ, Westpac Banking Corporation recently announced it would further its clampdown on interest-only deals for owner-occupiers.
In a notice issued to mortgage brokers last Monday, ANZ said the maximum loan-to-value ratio (including lender’s mortgage insurance) would be limited to 90% for owner-occupiers, effective immediately.
This change applies to both new loans and customers with loans seeking increases and top ups. The maximum LVR for owner-occupiers was previously 95%, meaning borrowers will now have to stump up heftier deposits or have increased equity in their homes.
There are some exemptions to this rule, including bridging loans and parental leave on a loan where interest-only is available for a maximum of 12 months before reverting to principal and interest.
Last week, ANZ revealed it would further its clampdown on customers signing up for interest-only loans for both owner-occupiers and investors, impacting those with LVRs higher than 80%.
The banks have continued their clampdown on interest-only loans in compliance with the Australian Prudential Regulation Authority’s (APRA) new limits on interest-only mortgage lending. The regulatory watchdog said lenders should restrict higher-risk interest-only loans to 30% of new residential mortgages.
According to Westpac, a 95% LVR is still acceptable for owner-occupiers if they opt to make principal and interest repayments.
“In this low-rate environment we are offering competitive interest rates to customers who make principal and interest repayments to encourage them to pay down their mortgages and own their home sooner,” said Westpac.
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