Investor Presentaiton
Australian mortgage portfolio underwriting.
Credit policy at September 2022
Income
Credit Score &
•
Credit Bureau
Expenses
Serviceability
assessment
•
Genuine savings
deposit
requirements
Security
LMI
•
•
•
•
•
•
•
•
•
•
•
Verified via payslips, tax returns or salary credits, with other supporting documentation such
as PAYG payment summaries or ATO Statements (minimum standards apply)
Shading of at least 20% applies to less certain income sources i.e. overtime, bonuses
Bespoke application scorecards segmented by new and existing customers
Credit and score override rates tracked and capped
Credit bureau checks required
Assessed as the higher of a borrower's HEM¹ comparable expenses or HEM, plus any
expenses that are not comparable to HEM (e.g. private school fees, life insurance)
HEM is applied by income bands, post settlement postcode location, marital status and
dependants
17 expense categories used, aligned with Melbourne Institute guidelines and LIXI standards
For serviceability assessment, loans are assessed at the higher of
The customer rate, including any life-of-loan discounts, plus the serviceability buffer
of 3.0% (up from 2.50% in October 2021), or
The minimum assessment rate, called the "floor rate", currently 5.05% (from
October 2020, previously 5.35%)
For I/O Loans, serviceability is assessed on a P&I basis over the residual term
Fixed rate loans assessed on the variable rate to which the loan will revert after fixed period
All existing customer commitments are verified
Review Westpac Group accounts and Comprehensive Credit Reporting (CCR) to identify
customer commitments
Limits apply to higher debt-to-income lending; above 7x referred for manual credit
assessment
Credit card repayments assessed at 3.8% of limit or balance whichever is higher
Minimum 5% proof of genuine savings for higher LVR loans (typically LVR >90%).
Any Home Owners Grants are not considered genuine savings
LVR restrictions apply depending on location, property value and nature of security
Restrictions on high-density apartments based in postcode defined areas (generally capital
city CBD's) and properties in towns heavily reliant on a single industry (e.g. mining, tourism)
Mortgage insurance for higher risk loans, such as LVRS >80%. Special package policy
waivers apply for certain professionals and Westpac staff
Mortgage credit quality
Australian mortgage portfolio by
year of origination (% of total book)
Calendar year
1
1 1 1 1 2 3
4
5 6 7 7 7
Pre-2006 ◉N
2006 |
2007
2008
2009 →
- OLON
2011
2012
10
23
18
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Australian mortgage portfolio by
insurance profile² (%)
6
80
O
15
Insurance not required
(Low risk profile
including loans
<80% LVR)
Not insured >80% LVR
(Special package policy
waivers apply for
certain professionals
and Westpac staff)
Insured³
(>80% LVR)
Chart does not add to 100 due to rounding
1 HEM is the Household Expenditure Measure, produced by the Melbourne Institute. 2 In Second Half 2021 Westpac Lender's Mortgage Insurance Limited was sold to Arch Capital Group. The sale was completed on 31 August 2021. Westpac has
entered into a 10-year exclusive supply agreement for Arch to provide lenders mortgage insurance to the Group. 3 Includes loans where LMI applies to >70% LVR loans, for example, single industry towns.
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