Westpac tightens mortgage lending for foreign buyers

The bank confirmed in a statement that it has made changes to its non-resident lending policy, effective this week.

Westpac, St George, Bank of Melbourne and BankSA will no longer accept mortgage applications from non-residents. The banks will also no longer accept any foreign self-employed income applications or applications from temporary visa holders living overseas.

In addition, loan-to-value ratio for acceptable domestic applications with foreign income will be reduced from 80 per cent to 70 per cent.

“In line with Westpac Group’s responsible lending practices, we have strengthened our policies regarding non-residents lending and foreign income, which represent a very small component of our loan book,” a Westpac spokesperson said.

Loans for Australian citizens, permanent residents and those holding eligible visas living and working in Australia remain unchanged.

Westpac’s decision comes after ANZ and CBA took similar action earlier this month to reign in mortgage lending to foreign buyers.

In its half-yearly Financial Stability Review released earlier this month, the RBA predicted that a substantial reduction in Chinese demand would likely weigh most heavily on the apartment markets of inner-city Melbourne and parts of Sydney “not only because Chinese buyers are particularly prevalent in these segments but also because other factors would reinforce any initial fall in prices”.

“These include the large recent expansion in supply in these areas as well as the practice of buying off-the-plan, which increases the risk of price declines should a large volume of apartments return to the market if the original purchases fail to settle.”

While Australian banks have little direct exposure to Chinese property investors, the Reserve Bank fears a reduction in demand could trigger broader risks for local lenders.

“Although the direct exposures are small, if a reduction in Chinese demand did weigh on housing prices, this could affect banks’ broader mortgage books to some extent,” the RBA said.

According to the latest NAB Quarterly Australian Residential Property Survey, the share of demand coming from foreign buyers fell to a two-and-a-half-year low of 11.8 per cent, down from a peak of 16.8 per cent in the third quarter of 2014.

[Related: CBA announces mortgage changes]