Westpac will soon increase interest rates for foreign mortgage customers, reports the Australian Financial Review.
In its column, Street Talk, the paper says that the major bank will introduce a new loan category, Non-Resident Reference Rate, next month. Customers falling under this category will be required to pay a 0.5% higher standard variable rate.
These changes will affect offshore-based customers who currently have loans with the bank and not Australian citizens or residents.
The decision is the latest in a long crackdown by the major banks on foreign lending spurred on due to the difficulty in securitising these types of loans.
Talking with the Australian Financial Review, a Westpac spokesperson said that the higher rates took into account the bank’s “risk settings, the economic landscape, and expected changes in capital requirements for that segment of the mortgage market”.
As of 26 April, Westpac announced it would no longer loan money to foreign home buyers seeking to purchase residential property – meaning that the bank has not settled any new mortgages from offshore-based clients since then.
A spokesperson confirmed with Australian Broker that offshore loans were a small part of Westpac’s portfolio as well.
Other major banks such as NAB and ANZ have also introduced similar policies halting new loans to foreign buyers.
Westpac has also dropped its loan-to-valuation ratios (LVRs) from 80% to 70% for local applications that include foreign income.
