Three words we thought we'd never say...

Well done Westpac!

Late last Friday Westpac made a monumental move –  announcing it would lower its stress test for some refinancers to help get Aussies out of ‘mortgage prison’.

It is the first of the big four to go against APRA and its recommended assessment rates, and we are pretty impressed they have had the courage to do so.

For background, APRA (The Australian Prudential Regulation Authority) sets the interest rate buffer (currently at 3 percent) at which we are assessed to get a home loan. What this means is when a bank is checking a borrower’s repayment capacity, the bank has to ensure they can pay 3 per cent higher than the current rate!

APRA promised to review this rate in February but didn’t change it, despite banks, economists and experts saying it is too high. It acknowledged that high-debt to income ratios have reduced but said heightened risks to serviceability remain.

What this means is fewer people can refinance so they are locked in a mortgage prison. Worse yet, fewer people can get loans to buy or move. EVEN worse, it impacts investors the most. It means fewer investment properties in the market, which results in more rental stress and you guessed it – increased homelessness. It is decisions like this that contribute to the crisis.

What Westpac announced this week is it will allow some people who are looking to refinance to be tested under a ‘modified serviceability assessment rate’ if they do not pass the standard test.

To be eligible, customers must: 

• Have a credit score of more than 650
• Have a good track record of paying down all existing debts over the last 12 months

This means that more people can purchase a home, more investors can provide more rental properties and build their personal wealth (both things taking pressure off the government but more on this another time). Look, we know it is self motivated in an attempt to increase their piece of the refinancing and mortgage pie, but it is also a decision where there is a real, genuine positive community benefit in the face of the ignorance of the social impact by the Regulator.  

Westpac deserves the acknowledgement for this. We can now only hope other banks will follow suit and make similar logical decisions.

In a previous article, we talked about pent up property demand and the triggers as to what will ‘release’ the dam into the market. These included stabilising of interest rates and/or lowering of assessment rates. Moves are being made, and now is the time to start thinking about how as an investor you can start to get things in place to take advantage of when the next property wave comes … and it’s on its way –  as we predicted last year.

Decisions made by APRA have contributed to homelessness in Australia, and subsequent decisions are likely to have contributed to the worsening rental crisis. As a property investor, YOU can be part of the solution while also maximising the opportunity the challenge presents.

Contact us to book in for a free consultation today to discuss how you can reap the benefits of what’s ahead.