Following APRA updating its serviceability guidance earlier this month, Westpac will be amending its residential lending policy, effective tomorrow.
As of 16 July, the bank's home loan serviceability floor rate will decrease from 7.25% to 5.75%.
The buffer rate will increase from 2.25% to 2.50%.
The statement noted, “This may have a positive impact on the borrowing capacity of qualified borrowers.”
If the variable rate applying to the proposed loan plus the interest rate buffer of 2.50% is less than the floor rate, then the floor rate is applied as the Serviceability Assessment Rate (SAR).
If the variable rate applying to the proposed loan plus the interest rate buffer of 2.50% is greater than the floor rate, then the rate on the loan plus the interest rate buffer is applied as the SAR.
The bank's online tools for brokers will be updated to reflect these changes.
The only other major to have amended its lending policy thus far is ANZ which, as of today, has officially changed its floor rate to 5.50% and the buffer to 2.50%.