Westpac tightens credit due to funding problems

Written by admin on January 20, 2010 – 12:34 pm

In what has been a shock to brokers, Westpac has written to mortgage brokers informing them RAMS branded products will no longer be distributed to third parties, and only marketed to its 92 franchised stores. The Herald Sun writes “WESTPAC’S funding problems have forced it to shut down a key part of the RAMS Home Loans business. ”

This follows the lowering on the loan value ratios (LVR) on Westpac’s own branded standard variable mortgages on Monday from 92 to 87 per cent. It has also lowered the LVR on more risker low documentation loans to 80 per cent.

The lowering of the LVR will mean home buyers are required to contribute a larger deposit before they can get a loan.

» Westpac cuts brokers from RAMS loans – The Herald Sun, 19th January 2010.

» Westpac turns off tap – The Herald Sun, 20th January 2010.


Posted in Australian economy, Australian Housing | 2 Comments »

2 Comments to “Westpac tightens credit due to funding problems”

  1. Dan Says:

    Actually I think it means prices will fall, especially if other banks follow suit. Reducing the LVR from 92% to 87% means that for the same deposit, the maximum price a homebuyer can pay is reduced by 38%!!!! That’s an awful lot more saving, and will keep many people out of the market. Beginning of the end? Or the end of the beginning?

  2. Parrotile Says:

    In the “Good Old Days” (i.e 1980′s!) the accepted LVR was never more than 80%. A lower LVR has the big advantage of holding prices DOWN to reasonable levels, whilst requiring potential buyers to demonstrate the ability to save, or rather, demonstrate the ability to manage their finances – essential if you’re planning to rent money on a 25 year term. If the International Credit Squeeze continues (the US Treasurey is hinting very strongly that this will be the case), then as cheap money dries up, so the LVR may decrease further. It’s not inconceivable that in the future an LVR of not less than 75% will be required, especially for those who have had a poor payments record.

    Combined with increased costs of borrowing, things are looking decidedly “interesting” from the RE viewpoint – as Dan pointed out, all these factors are pushing the Aussie RE Bubble to it’s limit – and once the prices start falling, the “Investors” will be rather keen to offload their “Investment” whilst the going’s still good – and we all know the effects of sudden oversupply on Market prices!! Potential visions of “Buy One, Get One Free!” abound, and those canny, derided Renters may very well be the ones having the last and longest laugh!