Morning Briefing: Westpac eases up investor lending restrictions

Major lender Westpac is set to make life easier for investors... RBA’s Stevens says no need to amend Bank’s inflation target...

Westpac eases up investor lending restrictions
After tightening up its loan book in response to the Australian Prudential Regulation Authority (APRA) driven crackdown last year, major lender Westpac is set to make life easier for investors.

According to a report in Fairfax media outlets, the big four bank has advised mortgage brokers that its loan to value ratios (LVR) for investment loans will move back from 80% back to 90%.

Phillipe Brach, chief executive officer of Multifocus Properties & Finance, said the move by Westpac came as no real surprise.

“I’m not surprised. The reason they reduced their LVR to 80% in the first place was because they needed to fit in with the APRA guidelines and reduce the growth of their investment loan book to under 10%, so they had to take some drastic measures,” Brach said.

“It was also foreseen that as soon as they got things under control that they would go back [to 90%] because at the end of the day the banks need to make money and buy having an LVR at 80% there’s a big chunk of business that goes off to other lenders like CBA that are doing 90%,” he said.

RBA’s Stevens says no need to amend Bank’s inflation target
(Bloomberg) -- The Reserve Bank of Australia’s outgoing Governor Glenn Stevens defended the central bank’s inflation target and said the framework had proved a successful tool in deciding interest rates.

“It’s not at all a very rigid thing that demands knee jerk responses on our part,” Stevens said of the 2 percent to 3 percent target band, in remarks to the Trans-Tasman Business Circle in Sydney on Tuesday. “It’s easiest the best monetary policy framework we’ve ever had.”

Stevens said he was responding to commentary that the inflation target should be changed as disinflation that’s swept much of the developed world arrives in Australia. The RBA cited low, broad-based inflation as the trigger behind reducing the cash rate to a fresh low of 1.75 percent on May 3, its first cut in a year.

The governor said that nobody could control inflation in the “very short-term and you shouldn’t try.” Australia’s annual inflation rate has been below 2 percent since the third quarter of 2014.

“We shouldn’t just give up and throw away a framework that’s actually been very successful,” he said.