Bankwest cuts negative gearing benefits from home loan assessments
Updated
Bankwest has confirmed that property investors are no longer able to include the tax benefits of negative gearing when applying for a home loan from the institution.
In an emailed statement, a Bankwest spokesman said its loan serviceability calculators were updated on Friday to remove negative gearing tax benefits, "in line with regulatory guidance".
"This change aligns Bankwest with industry best practice and guidance from regulators, specifically APG 223 within the Residential Mortgage Lending prudential practice guide," the spokesman added.
Bankwest is a bit late to the party, with the bank regulator APRA's boss, Wayne Byres, speaking disapprovingly of the practice of including negative gearing benefits in loan assessments almost two years ago, after an APRA survey showed what Mr Byres labelled "disconcerting" lending practices.
"We also came across a few instances in which ADIs [authorised deposit taking institutions] were relying on anticipated future tax benefits from negative gearing to get a borrower over the line for a mortgage," he said in the May 2015 speech.
Mortgage brokers say including the benefits of negative gearing in investor loan assessments is still a widespread practice, with Westpac having excluded it for a while last year before changing back.
The Bankwest spokesman explained that expected tax refunds due to claiming property investment losses against other income would no longer be including when testing how much customers can afford to borrow.
"For customers who operate their investment property at a loss, where the income of the investment property does not exceed the costs, the related tax benefit will no longer be included in Bankwest's calculation for serviceability of the loan," he noted.
Bankwest is wholly owned by the Commonwealth Bank and this appears to be the latest move by the CBA group to cool property investment loan growth, as the institution's recent strong growth in that segment approaches APRA's 10 per cent speed limit on investor loan growth, in place since late-2014.
Last week, CBA told mortgage brokers that it would no longer be accepting refinancing applications from property investors who want to switch from other banks.
At that time, CBA's head of retail banking Matt Comyn said the bank had not breached APRA's limit.
"Commonwealth Bank has remained below APRA's 10 per cent investment lending growth threshold since it was announced in December 2014," he noted in a statement.
"We remain focused on meeting our regulatory commitments and on ensuring the long-term sustainability of the Australian home loan market."
However, the ABC understands that CBA is not mirroring its subsidiary, and existing and potential Commonwealth Bank customers are not subject to an exclusion of negative gearing benefits from their mortgage assessments.
Bankwest said its change affects all new applicants and any existing customers who may require a new serviceability calculation after February 10, 2017.
Other banks could follow suit
Bendigo and Adelaide Bank chief executive Mike Hirst has warned the bank could consider axing negative gearing benefits as an option to curb investor lending.
Mr Hirst said the bank was not currently considering an immediate move to rein in negative gearing rebates and loan growth, but signalled it was in his toolkit.
"We aren't in the position where we need to be slowing that [growth] at the moment, so we don't intend to be making any changes to what is a legitimate income assessment," Mr Hirst told The World Today.
"But in time if that becomes an issue for us, that's one thing we may look at."
The additional signs of concern about real estate investment scrutiny coincide with Bankwest delivering just a 0.1 per cent increase in half-year profit of $209 million.
Bendigo and Adelaide's net interest margin, a key measure of profitability, has fallen slightly to 2.1 per cent, after last year's cash rate reductions from the Reserve Bank and tougher regulatory requirements from the Australian Prudential Regulation Authority.
The bank's dividend was held steady at 34 cents a share.
Investors sold on the disappointing result and Bendigo and Adelaide Bank shares were down by 4.6 per cent at $12.05.
Topics: consumer-finance, banking, housing-industry, australia
First posted
