From this week, Westpac will allow select refinancers who do not meet the bank’s standard serviceability test to undergo a “modified Serviceability Assessment Rate,” provided it exceeds the bank’s floor rate.

To be eligible for Westpac’s new “Streamlined Refinance,” customers must have a credit score of more than 650 and a good track record of paying down all existing debts in the last 12 months.

Borrowers must also be refinancing to a loan that has lower monthly repayments than their existing one.

CEO and Co-founder of WLTH Brodie Haupt said Westpac’s decision to reduce its stress test is a welcome move, yet there could be wider implications that need to be considered.

“Westpac’s decision may set a precedent, leading to increased competition among banks and lenders in refinancing,” Mr Haupt told Savings.com.au.

“This could benefit borrowers struggling with high mortgage rates. However if stress tests become more lenient, APRA may review its rules to maintain market stability.

“This could affect the maximum loan amount that borrowers can qualify for, meaning lenders may apply stricter criteria when assessing loan affordability, resulting in some individuals being declined for their desired loan amount.”

Even if you are eligible for Westpac’s new policy, Mr Haupt recommends shopping around and comparing other rates on the market that may offer a better deal.

Full Article: Savings.com.au