Westpac's First Home Buyer Scheme: A Boost for Property Market
The Australian property market is experiencing a surge in activity, thanks in part to Westpac's expanded first home buyer scheme. According to the bank, this initiative has led to a 150% jump in loan applications, with mortgage brokers reporting a significant increase in applications from prospective buyers. The 5% deposit guarantee has slashed the savings wait time for many first-time homeowners, reducing the deposit requirements for a loan.
This surge in applications comes as a contrast to a market dominated by investors, who have often used equity in their existing housing portfolios to outbid prospective first home buyers at auctions. However, the expansion of the guarantee has accelerated the mortgage market, with Westpac's chief financial officer, Nathan Goonan, noting increases in applications across all channels.
The Reserve Bank's decision to cut the official cash rate has also fueled national home lending and house price growth, which Westpac predicts will continue to accelerate over the next 12 months. Lower interest rates have helped more mortgage holders get on top of their repayments, with the delinquency rate for Australian home loans more than 90 days behind falling to 0.73%, from 1.12% a year ago.
Despite the positive impact of the scheme, there are concerns about the risks associated with lending to investors. The Australian Prudential Regulation Authority is monitoring whether falling interest rates lead to riskier lending, and is discussing limits on new investor, interest-only, or small-deposit loans. Westpac's chief executive, Anthony Miller, acknowledges the risks but plans to fight for more of the investor market.
In other news, Westpac has updated its sustainability report to show that it has closed funding avenues available to thermal coalminers, which traditionally rely on banks for direct finance or by raising money through the issuing of bonds. The bank has reduced its corporate lending to institutional thermal coalmining customers to zero and no longer provides bond facilitation for customers that derive significant revenue from thermal coalmining.
Westpac's annual profit has slid 2% to $6.9 billion, down from $7.1 billion a year ago. The bank will pay a full-year dividend of $1.53 a share.
