Australian banking giant Westpac Banking Corporation (ASX:WBC) has announced it will cut its interest rate discounts for new housing investors. Analysts see the move as a response to the rapidly growing lending to property investors. In the recent months, as interest rates have been slashed, many economists have noted the surging housing market in Australia, in particular the Sydney housing market. There have been concerns from many regulatory and industry bodies that interest rate cuts could exacerbate the already rapidly growing housing market.
The bank sent out a memo to mortgage brokers on Monday announcing the changes. Part of the change in policy has been attributed to the new requirements from the Australian Prudential Regulation Authority (APRA). The new regulations from the APRA state that housing growth cannot exceed 10 per cent. “Westpac continues to be a responsible lender, helping home lending customers and ensuring sustainable growth in the home loan market,” the memo said. The changes will apply to Westpac and all of its Brands, including St George, Bank of Melbourne and BankSA.
Out of the four major Australian banks, Westpac is the most involved with the property investor lending market. In the year up to March, its investor lending was growing at 11.5 per cent, which is 1.5 per cent higher than the APRA regulation. “The Australian Prudential Regulation Authority has stated investor credit growth should be at a benchmark of 10 per cent and we will make appropriate changes to the levers available to us over time,” the company said in response to the data. Shares of WBC are up 25c, or .77 per cent, at $32.81 per share around 3:35pm on Monday. Out of the four major banks, Westpac has underperformed the most, with shares of the company falling 3.95 per cent in the last 12 months and .97 per cent so far this year.
Author: Simon Herrmann
May 25, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.