Mortgage risks trend up at Westpac

The bank’s latest financial figures also show the lender is on track to meet APRA’s interest only and investor speed limits

Mortgage risks trend up at Westpac



Major bank Westpac has reported a slight increase in mortgage risks during the third quarter in its latest trading update.

Ninety plus day delinquencies rose two basis points to 0.69% as of 30 June 2017 – a slight uptick which the bank said was mostly due to the impact of Severe Tropical Cyclone Debbie in March and April this year.

More broadly however, Westpac’s volumes of 30+ day delinquencies actually dropped one basis point to 1.38% between the March and June quarters.

Current variable mortgage interest rates at Westpac are now 5.24% p.a. for P&I owner occupied, 5.83% p.a. for I/O owner occupied, 5.79% p.a. for P&I investor, and 6.30% p.a. for I/O investor.

This multi-level pricing scheme has been introduced to meet APRA’s macro-prudential targets and has placed I/O interest rates at least 50 basis points higher than the equivalent P&I loan. Likewise, investor loans are at least 47 basis points higher than the equivalent owner occupied loan.

The bank has also introduced a number of other measures to meet these prudential requirements including setting an 80% maximum LVR limit on all new I/O loans, waiving the switch fee for customers moving from I/O to P&I, and closing the door on external refinances for owner occupier I/O loans.

Overall mortgage lending growth at Westpac is now 6.3% for owner occupied and 5.9% for investor loans.

Westpac is also on track to hit APRA’s 30% I/O speed limit with 24% of applications and 30% of settlements falling into this category in July 2017. In this same time period, $3.9bn worth of loans were switched from I/O to P&I. Of these, almost $3bn were switched because of a customer request rather than because the loan simply reached the end of the I/O period.

The trading update also released figures breaking down Westpac’s house lending portfolio by region as follows:
  • NSW & ACT (41%)
  • Vic & Tas (26%)
  • Qld (17%)
  • WA (9%)
  • SA & NT (7%)
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