Month: May 2017

No big break for the non-majors

From Mortgage Professional Australia.

Although majors have been hit by bank levy, non-majors will struggle to take advantage. Brokers shouldn’t expect sharper rates from the non-majors despite the introduction of the recent bank levy.

Although the Federal Budget’s 0.06% levy on Australia’s major banks was welcomed by many as levelling the playing field, this week’s ratings downgrade by S&P represented a ‘backward step’ for competition, according to ME bank CEO Jamie McPhee.

S&P downgraded the credit ratings of 23 banks, including ME, making it more expensive for these banks to borrow and consequently lend as mortgages. The majors were not downgraded, which McPhee attributed to their implicit guarantee by the banks:

“The current environment does not provide for ‘competitive neutrality’, which is to the detriment of consumers. This situation will remain until both the gap in capital requirements is further reduced and the cost of funding advantage currently being enjoyed by the major banks due to their ‘too big to fail’ status is removed”.

Why non-majors may not lower rates

Even if the majors passed on the bank levy in mortgage rates they would still enjoy a 5-12bp advantage over the non-majors, according to Digital Finance Analytics principal Martin North.

“Everyone else – apart from the non-banks – have a significant competitive disadvantage” North told MPA “Whether the impost of a bank tax is a good way to deal with that structural competitive disadvantage, I have my doubts.” Like McPhee, North suggests the continued raising of capital requirements for majors – something currently being considered by APRA – would better improve competition.

Other considerations will deter the non-majors from lowering interest rates to compete, North claims: “if the big four reprice their mortgages I’m pretty sure the regionals will follow anyway because they need to do margin repair on their books also.”

The Business Council of Co-operatives and Mutuals has announced a marketing drive off the back of the bank levy, however, encouraging consumers to ‘#switchdontbitch’. According to Melina Morrison, CEO of the Council, “It is cheeky for the banks to cry poor. Switching banks is the best way for consumers to make it clear that they are not walking ATMs for the big banks.”

Commission changes could hammer mortgage franchise

From Australian Broker.

Future decisions to decrease broker commissions have analysts predicting a negative impact on mortgage franchises such as Mortgage Choice.

A research note released by investment research firm Morningstar looked at the headwinds facing Mortgage Choice and determined that although the firm is performing well now, potential changes to the broker commission model could lead to several detrimental effects.

Mortgage Choice currently pays franchisees 73% of upfront and 61% of trail received from lenders, putting it in a good position to pass on the negative impact of lower commission rates to franchise owners, analysts said.

However, despite the company’s strong market presence, it has been losing market share of the mortgage broker segment as smaller players take a cut of the commission themselves. This could lead to higher turnover for those with the firm.

“Commission cuts from banks could encourage more franchisees to look for a better deal outside the Mortgage Choice franchise model,” analysts said. This trend may also have the same effect on other mortgage franchises around Australia.

A downturn in the national housing market could also produce lower returns for Mortgage Choice over the long term, Morningstar predicted.

“Future profitability relies heavily on the ongoing strength of the Australian housing market and the preparedness of the four major banks to continue using mortgage brokers to distribute mortgages and continue to pay current levels of upfront commissions.”

In the event that housing finance approvals decrease in a downturn, Morningstar analysts predict Mortgage Choice’s upfront commission income will be affected.

Upfront accounted for 45% (or $39m) of gross broker commission income, while trail accounted for the remaining 55% (or $48m) in the first half of the 2017 financial year.

Finally, Mortgage Choice is subject to regulatory changes by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) both of which may affect the firm’s ability to grow, analysts said.

“ASIC’s review into broker remuneration could result in regulatory changes requiring a rebasing and/or reduction in the current commission structure, and if lenders reduce commission rates or negatively alter commission structures, Mortgage Choice’s revenue and profitability would be under pressure.”

However, despite these potential risks, analysts said the franchise was still financially sound in the present. As well as the high levels of expertise amongst the board and senior management, Mortgage Choice’s strategy to diversify into financial advice has also been effective at raising revenue.

“The business has consistently delivered on its strategy and business targets and we expect more of the same in the future.”

Suncorp Launches Another New Style Store

Suncorp has today unlocked the doors to a new financial services experience in Queensland, opening its second Concept Store in the Brisbane suburb of Carindale.

The Carindale Concept Store brings together solutions and services from across the company’s brands, including Suncorp, AAMI, Shannons and Apia, as well as solutions from other providers, to help customers with life’s key financial decisions, such as purchasing a home.

Suncorp’s CEO Customer Platforms Gary Dransfield said the Store leverages insights gained from the Parramatta Concept Store, Brisbane city Co-Creation Lab and understanding of the Queensland market to create an innovative store experience in a unique retail environment.

“We’ve reimagined the experiences customers expect to receive when they visit a traditional bank branch or insurance store to make it easier for them to make decisions around the moments which matter most,” Mr Dransfield said.

“The Store connects customers to new technologies and digital solutions to help customers buy and protect their home or car, start a family, or start and grow a business.”

Taking inspiration from international retailers, the Carindale Concept Store utilises innovation to make customer experiences interactive and tailored to support their individual needs.

Mr Dransfield said the company’s strong brand heritage in Queensland would help deliver the benefits of Suncorp’s marketplace strategy to local customers through connecting them to a wider range of products and services from across the company’s many brands.

“We’re creating unique experiences that help educate, inspire and delight our customers, with the express goal of helping them in those areas we know can be confusing, complex and intimidating,” Mr Dransfield said.

“The Store’s test and learn environment also enables us to trial new concepts with customers and make changes based on their feedback before introducing them in other locations.”

Key experiences and technologies include:

Design – Interactive format which allows customers to experience retail zones specific to their individual need. The modular design allows for the store to change its format to suit monthly themes and workshops. The modern appearance has a light space, with greenery to create a visually appealing store.

Key features – Simplified transactional space, Open 7 days, concierge greeting, designated self-service area, multi-brand offering, workshops and seminars, free wifi and refreshments.

Discovery Tool – Connects customers with Suncorp solutions, as well products and services from other companies, across an entire journey (example: Buying a Home. Starting a Business) Companies featured – Jim’s Building Inspections, Lawlab, Hipages, JB Hi-Fi

Digital Finance Analytics – Quenching The Thirst For Accurate Household Mortgage Data

Digital Finance Analytics Core Market Model is now being used by a growing number of financial services companies and agencies who want to understand the true dynamics of the current mortgage market and the broader footprint of household finances across Australia.

The DFA Approach

By combining our household survey data, with private data from industry participants as well as public data from government agencies we have created a unique statistically optimised 52,000 household x 140 field resource which portrays the current status of households and their financial footprint. Because new data is added to each week, it is the most current information available. We also estimate the extent of future mortgage defaults, thanks to the data on household mortgage stress.

Posts on the DFA blog uses data from this resource.  Momentum in our business has picked up significantly as concerns about the state of household finances grow and the thirst for knoweldge grows. We plug some of the critical gaps in the currently available public data which is in our view both limited and myopic.

A Soft Sell

The complete data-set is available purchase, either as a one-off transaction, or by way of an annual subscription which includes the full current data plus eleven subsequent monthly updates.

Other clients prefer to request custom queries which we execute on a time and materials basis.

In this video you can see an example of the core model at work. We show how data can be manipulated to get a granular (post code and segment) understanding of the state of play.  This is important when the situation is so variable across the states, and across different household groups.

We Hold Granular Data

  • Household Demographics (including age, education, structure, occupation and income, location, etc.)
  • Household Property Footprint (including residential status, type of property, current value of property, whether holding investment property, purchase intentions, etc.)
  • Household Finances (including outstanding mortgages and other loans, credit cards, transaction turnover, deposits, superannuation and SMSF, and other household spending)
  • Household Risk Assessment (including loan-to-value, debt servicing ratio, loan-to-income ratio, level of mortgage stress, probability of default, etc.)
  • Household Channel Preferences (including preferred channel, time on line, use of financial adviser, use of mortgage broker, etc.)
  • Segmentation (derived from our algorithms; for household, property, digital and others)

Request More Information

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ANZ Accepts Bank Tax Will Be Imposed

David Gonski, ANZ Chairman wrote to its shareholders, and included comments on the bank tax, and and also addressed the question of the relationship between the community and the banks.

Normally I would write to update you on our financial performance at that time. However, with the recent announcement of a new tax covering five major Australian banks in the Australian Government’s Federal Budget, I felt there was a need to be in touch with you sooner.

It is not only important to share with you the key aspects of our performance in the first half of 2017, we feel it is important that you are aware of the likely impacts of the tax and how we are addressing the situation.

2017 FIRST HALF FINANCIAL PERFORMANCE

During the first half of 2017 ANZ made good progress with our strategic focus on creating a simpler, better capitalised and more balanced bank. Statutory Profit was $2.9 billion, up 6%, allowing us to distribute an Interim Dividend of 80 cents per share fully franked in line with the first half of 2016.

A highlight of ANZ’s performance in the first half was the progress we made in strengthening the bank and improving shareholder returns. ANZ’s Common Equity Tier 1 capital position rose to 10.1%, our strongest position in recent history. Our Return on Equity increased from 9.7% to 11.8%, the first material increase we have seen since 2010.

These are strong outcomes reflecting a significant reshaping of ANZ’s business over the past 18 months to adapt to the rapidly changing environment and deliver materially better outcomes, not only for shareholders but for our customers and the community.

In every area of the business we continued to work hard to improve the experience of our customers. We reduced interest rates on some credit cards, introduced new debit cards to improve accessibility for vision-impaired customers, and announced plans to improve security through the use of voice biometrics. To support small businesses, we launched new digital solutions such as ANZ BladePay and ANZ Be Trade Ready.

In Australia and New Zealand our aim is to be the best bank for home owners and people who want to start and run a business. Both Australia and New Zealand delivered a solid performance in the first half. We are growing prudently in home lending in Australia and remain number one for home loans across New Zealand concentrating on owner-occupiers,
and in the small business segment.

In Institutional Banking we continued to reshape the business to improve returns through the distinctive proposition we have supporting trade and capital flows to customers who value our network and capabilities in Australia, New Zealand and Asia. This saw Institutional Banking deliver positive results in Australia and Asia supported by strong productivity gains and improved capital efficiency.

We also made good progress in simplifying our business. We completed a strategic review of Wealth Australia and we are currently exploring strategic options for the business while ensuring that the distribution of quality Wealth products and services remains part of ANZ’s customer proposition. We also signed agreements to sell our 20% stake in Shanghai Rural Commercial Bank, the UDC Finance business in New Zealand, and ANZ’s Retail and Wealth businesses in six Asian countries.

IMPLICATIONS OF THE BANK TAX

In the 2017 Federal Budget, the Australian Government announced it would introduce a new tax from 1 July covering five major Australian banks. Based on the current draft legislation and ANZ’s 31 March 2017 balance sheet, we estimate that its annual financial impact would have been approximately $240 million after tax.

The net financial impact, including the Bank’s ability to maintain its current fully franked ordinary dividend, will be dependent upon business performance and decisions we make in response to the tax.

Clearly we are disappointed at the introduction of this new tax. However, given the support it has in Parliament, we accept that it will pass into law.

Our focus has been to work constructively with government to ensure the legislation associated with tax is as fair and efficient as possible in the circumstances. We believe:

  • The tax should have a sunset clause where it is extinguished when the Federal Budget is repaired, which is the principal stated reason for the tax.
  • The level of the tax should be set in the legislation so it cannot be increased in the future without the agreement of both Houses of Parliament.
  • Any future proposed adjustment should be referred to the Council of Financial Regulators for their public advice on how the tax and any proposed changes interact with other regulatory objectives.
  • The tax should apply equally to large foreign banks operating in Australia to ensure that it does not give foreign banks a competitive advantage over Australian banks in the area of global institutional lending.

BUILDING BRIDGES, RENEWING TRUST

To me, the bank tax is further evidence of the breakdown in the banking industry’s relationship with many in the Australian Parliament and the broader community. I want to assure you that ANZ has been working hard to ensure that community trust in banks reflects the crucial role we have in keeping our economy strong and secure. This includes our positive and constructive approach to recent Parliamentary inquiries and to dialogue over the introduction of this tax.

It is not in shareholders’ interests or the national interest that the relationship between banks and the community continues in this way. We clearly have much to do but our aim is to work even harder to help repair the relationship for the good of shareholders and of all Australians. We acknowledge that this will require us to think and act differently. However, ANZ believes that making this change is fundamental to creating value for shareholders, for customers and for the community now and in the future.

Our acknowledgement of the need to change and our actions will, I hope, be understood by the community as a genuine commitment to responsibly, serving our customers’ and communities’ needs.

ANZ has been an important contributor to Australia and New Zealand’s economic growth and prosperity for more than 180 years. While this is a challenging time, at ANZ we have a clear strategy, our business is performing consistently and we are committed to work even harder to help our customers succeed and to build stronger communities. On behalf of shareholders, I want to acknowledge and thank our 50,000 employees around the world for the contributions they make every day in the interests of so many customers in Australia and internationally.

ANZ is well positioned to continue delivering for shareholders and all our other stakeholders.

Market headwinds to increase risk for LMI sector

From Australian Broker.

Structural headwinds in the property market could result in heightened risks to the Australian mortgage insurance industry, according to a major international ratings agency.

In a new report from S&P Global Ratings, Insurance Industry and Country Risk Assessment: Australia Mortgage, analysts looked at the health of the industry and posited that the risk for the overall sector was intermediate.

Encroaching macroeconomic risks such as rising house prices and a growing ratio of household debt to disposable income have the potential to cause volatility in the mortgage insurance industry, analysts said.

If these factors cause a sharp correction in house prices – as mentioned in S&P’s recent downgrade of 23 Australian financial institutions – this could create a significant rise in credit losses.

“This increases the risk of material adverse claims experience for lenders’ mortgage insurers in Australia,” S&P said.

However, the agency’s base case scenario assumed that current and future actions by the government and regulators could lessen the impact of this scenario.

For the short term, analysts predicted that an “orderly correction” of house prices in Western Australia and Queensland would continue throughout the rest of the year.

“While the latter could increase insurance claims originating from these states, it is unlikely to pose a significant challenge to the credit profiles of insurers that offer lenders’ mortgage insurance (LMI).”

Furthermore, S&P predicts that employment levels – which can drive claims frequency for the sector – are likely to improve from 5.8% in fiscal year 2017 to approximately 5.2% in fiscal year 2019.

One pressure point highlighted by S&P was continued restrictions on lending practices put in place by the Australian Prudential Regulation Authority (APRA).

“We expect these regulatory actions to weaken LMI premium demand, absent a structural change to the product or market,” analysts said.

As well as reduced lender risk appetite in the high-LVR segment, S&P warned that outside factors could further drive market contractions as they have affected the market in the past.

“Other contributing factors include a major Australian bank shifting part of its mortgage insurance requirements offshore and, more recently, a material home lender choosing to retain the risk instead of purchasing insurance.”

As a result of these factors, S&P predicts a moderation in return on equity within the mortgage insurance sector over the next two to three years.

 

AMP provides update on growth strategy

AMP is today providing an update on its group strategy and growth opportunities at its  Investor Strategy Day, being held in Sydney.  This includes discussion on the changing role of financial advisers.

The strategy will direct investment towards higher-growth businesses in wealth management, AMP Bank and AMP Capital; leverage AMP’s  strengths in overseas markets; and maintain focus on driving cost efficiency.

Key elements of the strategy include:

  • Tilt investment to higher-growth, less capital-intensive businesses. Release and recycle capital from lower-growth business lines to fund growth and returns.
  • Grow wealth management by broadening its revenue streams via increasing contributions from advice and SMSF, while continuing to invest in product and platform development.
  • Build and integrate a goals-based advice operating system across face-to-face, phone, digital and corporate super employer channels.  Explore options to extend advice capability and systems into international markets.
  • Leverage AMP  Capital’s investment management expertise in fixed income, infrastructure and real estate to selected international markets, including Europe, North America and Asia.
  • Continue the rapid growth and increasing contribution of China businesses.
  • Manage Australian wealth protection, New Zealand and mature for capital efficiency and value, emerging embedded value as soon as possible.
  • Continue focus on costs to drive operational leverage.

AMP Chief Executive Craig Meller said:

“Our  strategy continues AMP’s shift from a product and distribution business to a  customer-led organisation focused on helping our customers achieve their  personal goals.”

“We are uniquely positioned to benefit from favourable domestic and global thematics including the mandated growth of the Australian superannuation system, a  growing banking market and the structural increase in demand for investment yield as the world’s population ages.

“The strategy is focused on realising our potential while adapting to an increasingly competitive market place and technology-driven disruption.

“In  Australia, we will continue to lead the wealth management market, changing the sector’s traditional economics by driving greater revenue from advice and self-managed super fund (SMSF) services.  We will help more Australians get more advice, more often through our transformed goals-based operating system.

“We will also diversify and drive revenue growth internationally through investment management, particularly infrastructure and real estate, and by extending our unique wealth operating system to offshore players.  Our partnerships with market leaders in China  (China Life) and Japan (MUTB) provide strong platforms for future growth.

“The approach for our Australian wealth protection, New Zealand and mature businesses is to manage them for value and capital efficiency.  These businesses have significant embedded value and we continue to look for ways to economically accelerate the realisation of this value.

“The  strategy will be underpinned by a continuing focus on operational efficiency  and cost discipline right across the group.”

 

Industry heads speak out on channel conflict

From The Adviser.

The head of a major aggregator and the executive director of an industry association have hit out at reports of channel conflict between banks and brokers.

Following The Adviser’s article yesterday concerning reports of a CBA branch offering to refinance a customer’s home loan at a “lower rate than his broker” (to which CBA and Aussie have not yet responded), two heads of industry have spoken out on this type of behaviour.

Speaking to The Adviser, Peter White, executive director of the Finance Brokers Association of Australia (FBAA), said that “if this is true, then for a bank branch to be doing that, it is unequivocally and unquestionably disgraceful”.

Mr White said: “The bank already had the client, I don’t think the bank branch should have that sort of authority to be able to do that in the first instance because what they are doing is reducing the margins that the bank has already accepted on a transaction.

“So, this is just a deliberate undercutting means, not to gain a client, but specifically to target brokers… If the bank has the ability to reduce the interest rate, they should offer it to everyone in the marketplace.”

He continued: “I think that whatever branch has done this needs a serious reprimand from CBA. If other branches do this, it has a significant impact on the bank’s lending portfolio and the margins and actually hurts the bank’s bottom line profitability-wise – because it’s actually more cost effective to write a loan through the broker network than the branch network.”

Mr White added that it “added greater insult to injury” that the broker who had written the loans originally was an Aussie broker, given that CBA “has a huge financial interest” in them.

He said that channel conflict and clawbacks are forming part of the discussion that it is putting together for the ASIC remuneration review and Sedgwick review.

Raise it with your aggregator

Mark Haron, the director of aggregation group Connective also spoke to The Adviser following the release of the story, saying that he would be “having a chat” with CBA.

While he added that he had not yet received notification from Connective brokers of CBA acting in this way, he emphasised that it is “really important that when brokers find these channel conflict issues that they immediately raise it with their aggregator”.

He commented: “This type of thing does undermine the relationship between the bank and the broker. Whether it’s a one-off or whether it’s systemic, the aggregator should be talking to the bank about it and trying to do something about it either way.

“So, the best way to manage it is to raise it to the aggregator so that the aggregator, through the agreements with the banks, can have each one dealt with.”

Mr Haron said that in the past he had found the banks to be “very, very responsive to any individual or potentially systemic channel conflict issue” and would make adjustments, where necessary.

However, he said that if this “stops happening and the banks are unapologetic” and were treating the broker channel differently, then Connective would be “making sure that the brokers are made aware of that and the brokers can determine whether or not they want to continue their own business with those banks”.

Touching on comments made by Digital Finance Analytics’ principal Martin North earlier this week, which suggested that some big banks had changed their appetite for broker-originated loans, Mr Haron said that he did not believe banks were changing tack on how they deal with brokers “at this stage”.

He said: “We’re not seeing it at this stage, but that’s not to say that they won’t.

“There are some of the major banks, like Westpac and CBA, that are being more focused on the proprietary channel and how they can serve customers better through that, and that’s understandable, because that’s how banks will always want to operate. But, if they do that to the detriment or by neglecting a broker, then it will hurt the overall market share.”

He continued: “I think most banks are aware of that and they will certainly see that played out if they don’t look after brokers. Certainly, if they don’t support brokers or see more conflict issues arising where it is clearly systemic and not a one-off, it will be quite detrimental and problematic for any bank that decides to go down that path.”

The financial crisis, ten years on – what have we learned?

In a long, but well worth reading speech, Dr Jens Weidmann President of the Deutsche Bundesbank paints an interesting picture of what happened, and why, and what has, and needs to still be done.

I will pick out just five sections, which to me at least, resonate with the current Australian situation.

Walter Eucken, founder of the Freiburg school and a pioneer of the social market economy, condensed the liability principle into a simple formula: Whoever reaps the benefits must also bear the liability.

This tenet was so dear to him that he declared it a constitutive principle of our economic order – for, in his view, economic agents will make responsible decisions only if the liability principle is enforced.

For instance, when banks become so big that their failure could bring the entire financial system to its knees, they can rely on politicians to throw them a lifeline if they run into difficulties. Thanks to this implicit insurance policy against the risk of insolvency, the banks benefit from a funding advantage even in normal times, as investors perceive the risk of default to be lower, and the capital market, deeming them too big to fail, therefore cuts them a certain amount of slack.

Furthermore, complex financial market products and confusing market structures had caused a fog to descend on the financial markets, with the resulting lack of transparency likewise serving to help drive the mispricing of risk. As a result, many banks were therefore undercapitalised in terms of their balance sheet risk.
But the rules that apply to enterprises, banks and investors must ultimately apply to governments, too. Their purse strings also tend to be loosened if they are absolved, either in part or in full, from bearing the financial consequences of their projects. In a monetary union, the impact of one country’s debt – felt in the form of rising interest rates – becomes more widespread across all of the other member states, not only because of the single capital market but also, similarly to the response to the too-big-to-fail problem, it makes sense for member states to come to each other’s rescue during times of crisis. To this extent then, too, there is a greater incentive to run up debt.

The interest rate environment led to a “search for yield”. What’s more, thanks to the low interest rates, low-income households were also able to shoulder the debt. At the same time, homeowners’ debt levels were falling as a result of ever-rising property prices, irrespective of their mortgage repayments. In the United States, many homeowners used this opportunity to refinance and take out additional mortgages. Borrowers became all the more vulnerable to rising interest rates and falling property prices, culminating in the subprime crisis of 2007.

To make matters worse, the bursting of the property price bubble in countries such as Ireland and Spain shook the banking system, which had helped to finance the construction boom on a large scale. Negative feedback effects of government support measures included a drastic deterioration in public finances, which intensified the banking crises in these countries even further. This was because banks held sizeable amounts of bonds from their own countries.

Just like so many others, Queen Elizabeth II also asked the simple, yet not so easy to answer question during a visit to the London School of Economics in the spring of 2009: Why did no one see it coming

The reputation of economists has undoubtedly suffered as a result of the crisis.

In his book “The Art of Thinking Clearly”, the Swiss author Rolf Dobelli writes: in 2007, economic experts painted a rosy picture for the coming years. However, twelve months later, the financial markets imploded. Asked about the crisis, the same experts enumerated its causes: monetary expansion under Greenspan, lax validation of mortgages, corrupt rating agencies, low capital requirements, and so forth. In hindsight, the reasons for the crash seem painfully obvious, and yet not a single economist (…) predicted how exactly it would unfold. On the contrary: rarely have we seen such a high incidence of hindsight experts.

The hindsight bias Dobelli goes on to write, is one of the most prevailing fallacies of all. We can aptly describe it as the ‘I told you so’ phenomenon.

And so the recent financial crisis will not have been the last crisis that we encounter. This is assured by the “This time is different” syndrome, as described by Carmen Reinhart and Kenneth Rogoff. Its core consists of the firm belief that financial crises only happen to other people in other countries; a crisis cannot occur here and now in our country. We are doing things better, we are smarter, we have learned from past mistakes.
But even if we do not fall for the “This time is different” trap, even the best economists in the world are not exactly sure what will trigger the next crisis.

Westpac overhauls lending conditions

From Australian Broker.

Major bank Westpac and its subsidiaries BankSA, Bank of Melbourne and St George have announced a wide range of changes to home loan products across the board.

Westpac has increased the rates on its fixed rate investment property, SMSF and non-resident fixed investment property loans with interest-only repayments by 20 basis points. These changes came into effect on Monday (22 May).

There will be no changes to Westpac’s policy of no new lending to non-residents, however, with the increased rates only available to non-residents seeking to switch their existing lending.

The major has also updated its customer identification and verification process, meaning brokers will now also have to ask for tax residency information.

Under the Common Reporting Standard (CRS), banks such as Westpac are obligated to collect and maintain information about the foreign tax residency of their customers. This means that, effective from Monday (22 May), new mortgage customers will need to confirm if they are a tax resident of a foreign country.

The collection of this data is mandatory when finalising a customer’s loan application with a branch. If the individual answers yes, the countries where they are a tax resident plus their Tax Identification Number (TIN) will need to be collected.

“Please be aware of this new requirement as you are having discussions with your customers, to prepare them for what information they need to provide to branch staff,” Westpac wrote in a broker note.

“We regularly review our rates and the changes to fixed rates reflect prudential regulatory requirements and the economic environment,” a Westpac spokesperson told Australian Broker.

Westpac’s subsidiaries

At BankSA, Bank of Melbourne and St George Bank, a number of changes have been made to interest rates across a wide variety of owner occupier and investment products, effective Monday (22 May).

For standard fixed rate principal & interest mortgages, the three year fixed rate for owner occupiers has dropped by 21 basis points while the three year fixed rate for residential investment dropped by 30 basis points.

The interest rate for these lenders’ residential investment standard fixed rate interest only loans increased by 20 basis points for terms between one and five years.

A similar increase of 20 basis points has also been made across all portfolio fixed rate loans (of one to five year terms).

Rates for principal and interest low doc loans have only changed for those with three year terms. For owner occupiers, rates dropped by 21 basis points while for residential investment they dropped by 30 basis points.

The final rate change is an increase of 20 basis points to all residential investment low doc fixed rate interest only loans and fixed rate super fund interest only home loans regardless of the term.

Westpac’s subsidiaries have also extended the current $1,500 Refinance Cashback offer for owner occupiers and investors which was previously due to expire on 31 May. Those eligible will need to refinance from outside Westpac or its subsidiaries. Owner occupiers are restricted to switching to a principal and interest loan.

Finally, the banks have banned borrowers from switching from principal and interest loans to interest only within the first 12 months of loan drawdown. If the client requires this, a full re-origination will be required with some limited exemptions.