Mortgage exit by Westpac leaves borrowers hanging

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About 300 of Westpac Singapore’s customers were notified that the bank would unwind its mortgage loan portfolio. The decision to unwind its mortgage loan portfolio will affect properties in Australia and New Zealand.

Westpac Banking Corp is of Australia’s oldest and second largest bank, and its Singapore office is Asia’s headquarters. According to Business Times, the bank gave its customers six months (till end September) to repay or refinance the loans within this time period.

Westpac’s decision to unwind its mortgage loan portfolio comes after bank posted its worst half-year profit since 2013.

It was reported in early May that the bank posted its second lowest half-year profit since 2013, as interest income shrank along with the housing market, and costs increased as the bank compensated some of its customers for mishandled services.

Analysts noted that there was no sign that Westpac would see a rebound in profits in the short term, and that falling housing demand, tightening credit standards and greater competition from non-banking sector, will constrain the bank’s performance.

They added that the weakness in the housing market, as well as increasing numbers of borrowers rolling-off interest only loan into principal and interest, is resulting in a rise in mortgage delinquencies. The proportion of borrowers at least 30 days behind on their mortgage loan in Australia has risen from 14 per cent in September to 159 per cent at the end of March.

Westpac
Image credit: Australian High Commission Singapore

The decision by Westpac to unwind its mortgage loan portfolio also comes after the Australian regulators in responding to property price boom, responded with lending caps.

Wespac’s chief executive officer, Brian Hartzer, was recorded as saying, “regulatory activity is intense, economic growth has slowed, consumer and business demand has softened, house prices have fallen and competition has increased. All these have put pressure on earnings and given us a list of issues to manage.”

Mr Hartzer added: “This is a disappointing result reflecting weaker business conditions and the bank dealing decisively with outstanding issues, including remediation and resetting our wealth strategy.”

Using mortgage brokers has many obvious benefits

Westpac’s decision to unwind its mortgage loan portfolio as several Australian lenders are clamping down on home loans to foreigners as concerns about housing market down under mount. Rising demand, especially from China, has triggered concern that Australian residents are being priced out of the property market.

Westpac said in late April that it will no longer lend to offshore customers who are not citizens, or who do not hold appropriate residency visas. And since early May, the bank followed up with a formal demand for payment from some customers, reminding them of the terms of the facility.

If the outstanding mortgage loan remain unpaid, the bank cautioned that it would not hesitate to take its client to a court or take possession of the related property. The demand notice also said that if the outstanding loan was not cleared, it intended to notify a credit reporting agency of the default by the customer.

The bank said that its decision to close its investment property loan book in Singapore as well as in Hong Kong was made after careful consideration of commercial and strategic factors, including its ability to service this market competitively. Westpac has since stopped offering new loans in 2016.

Options for customers affected by Westpac’s decision to unwind its mortgage loan portfolio includes a non-exclusive, non-binding arrangement with HSBC in Singapore, to assist with local refinance options, subject to the latter’s loan application process, credit criteria and relevant terms and conditions.

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Why you should refinance your mortgage loan while you still can

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Loan Interest Rate
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The minimum income to qualify for this International Mortgage for Australian property is $180,000 per annum. HSBC can provide such loans for foreigners residing in Singapore, whereas other banks cannot. Its Australian dollar loan rate is below 4% – one of the best any lender can provide. But refinance can only be done Singapore dollar to Singapore dollar or Australian dollar to Australian dollar.

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