After having tightened its credit policy in response to the economic uncertainty surrounding COVID-19 on multiple occasions, Westpac has begun to ease certain metrics for assessing serviceability to “pre-pandemic levels”.
The changes will go live at the major, along with its subsidiaries Bank of Melbourne, Bank SA and St. George, from 20 September 2020 and will apply to applications for new loans for both new and existing customers, including applications for an increase to an existing loan or any other activity which calls for a serviceability assessment.
Perhaps most notably, the shading on most types of non-base income is being adjusted back to 80% or “to pre-COVID-19 response” values, as put by the bank.
Changes made in May reduced the non-base income serviceability assessment to a maximum of 60%; this is being largely unwound as overtime, commission, director fees other than own company, as well as car, shift, and industry specific allowances have returned to 80%.
However, bonus income will remain at 60% shading for the time being.
Additionally, the group’s credit policy has been updated to specifically include licensed letting agents on the list of those who may provide confirmation of rental income or rental history; this comes in addition to a licensed real estate property manager or agent and applies to both mortgage insured and non-mortgage insured applications.
Lastly, Westpac has amended its policy to reflect that independent legal advice for income guarantees is now recommended rather than mandatory.
However, the expectation remains that brokers will continue to recommend that legal advice is sought.