Major bank Westpac has announced a series of new serviceability criteria in response to tighter regulatory requirements.
A note sent to brokers on Friday (18 August) detailed the changes which Westpac said came as the Australian Prudential Regulatory Authority (APRA) “refined its serviceability requirements for existing internal and external mortgage liabilities”. This refinement refers to changes made by APRA in March when it introduced new lending caps on interest only loans.
The bank has implented a staged approach to these policy changes which affect Westpac itself as well as subsidiaries St George, Bank of Melbourne and BankSA.
As of yesterday (21 August), Westpac has said that serviceability will now be calculated using a 20 year (or 240 month) term on all its portfolio loans.
Additionally, rental interest tax deduction will be calculated using the customers’ annual percentage rate. Where the deduction is linked to a mortgage liability held outside of the bank, the outstanding loan balance and current interest rates are to be evidenced through bank statements, transaction listings, loan contracts, etc.
The bank also introduced a number of changes to come into effect on 19 September. For all existing mortgages, the annual percentage rate and remaining interest only term will need to be captured.
Westpac’s online calculator will be updated, enabling brokers to enter details for each existing mortgage separately instead of a combined figure. Rental interest tax deductions will be calculated using the customer’s annual percentage rate.
The bank will provide further details on these changes in September.
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