Westpac Bank has announced that it will no longer lend to offshore customers who are not citizens or residents of Australia with an eligible visa. This announcement extends to its other brands St George Bank, Bank of Melbourne and Bank SA.
Further they have further restricted maximum lending ratios (LVRs) to Australian citizens working overseas earning foreign income, and tightened restrictions for non-resident co-borrowers even when they are the spouse of an Australian citizen. Joint loans where one applicant is a non-resident will no longer be accepted. And finally loans will only be advanced for the purpose of purchasing a property.
To summarise the new restrictions:
- maximum lending ratio for borrowers earning foreign currency income is now 70%
- No lending to non-residents and no guarantees accepted from non-residents
- No lending for refinances or equity release
- No lending to temporary visa holders purchasing vacant land
What Does This Mean?
The implications of this decision are many:
- It impacts Australian citizens living overseas by raising their deposit requirement by a further 10%
- It impacts Australian citizens with a non-resident spouse. Whilst these people are permitted to purchase property in Australia (under FIRB guidelines), they will no longer be able to obtain finance from Westpac (and its other in-house brands)
- It will further reduce the available pool of buyers in the Australian property market placing downward pressure on property prices
- It will negatively impact property developers - several have been concentrating on targeting prospective buyers in China and Singapore. This will affect existing developments and may cause a slowdown in new construction
- It dispels any doubt that Westpac subsidiaries are independent entities. Hitherto the StGeorge Bank group offered many niche products to the home lending market. Slowly but surely these niches are being closed down such that these brands are little more than regional marketing instruments.
It will be interesting to see if and how other lenders respond to this change in strategy by one of the market leaders. For more information please contact our office.