One of Australia’s major banks has reduced its serviceability floor rate by 0.30% to now sit the lowest of the big four.
The bank has also announced it is undoing a number of its temporary COVID-19 assessment measures, including reinstating the LMI waiver for certain professions, depending on their loan-to-value ratios and removing LVR ratio limits for self-employed applicants and those from certain tourist postcodes.
The changes apply not only to the major itself, but across its subsidiaries St George, Bank of Melbourne, BankSA and RAMS.
According to RateCity.com.au research director Sally Tindall, Westpac clearly recognises low rates are here to stay and intends to capitalise on that fact.
“Westpac’s decision to lower one of its key stress tests is reflective of the low rate environment we find ourselves in,” Tindall explained.
“Dropping the floor rate down to 5.05% will help some customers borrow more from the bank.
“For borderline customers, it could also be the difference between getting the green light on their home loan, and having their application turn down.”
Tindall also acknowledged the other majors may be moved to re-assess their own serviceability floors in the coming months, following Westpac’s action and home loan rates continuing to fall.
“The government is planning to wind back responsible lending laws to encourage the flow of credit, but the fact that the banks can set their own floor rate has already has made a huge difference,” Tindall noted.
“This, combined with ultra-low rates on offer, has helped facilitate a record number of new owner-occupier loans.”
However, while August data from the ABS did chart the largest monthly increase in new lending since records began in 2002, the rapid pace of growth may see a slowdown yet due to the Melbourne lockdown considering the lag-time between house purchase and loan settlement.
