In efforts to tighten lending, Bankwest has decided it will ignore negative gearing tax benefits for property investors when it calculates loan eligibility serviceability.
It effectively means investors won’t be able to borrow as much in a loan application.
It comes after the bank last week announced it wasn’t accepting new applications for investment property refinancing.
Bankwest’s parent company, the Commonwealth Bank, is tipped to follow with similar moves.
The moves could be in response to the ten per cent growth cap for investor loans that the Australian Prudential Regulation Authority has put on lenders.
While new borrowers can avoid the clamp down by looking for a loan elsewhere, the move will be retrospective for existing Bankwest customers.
H&R Block’s director of tax communications told News.com.au it was a significant step by Bankwest.
“I know [lenders] have tried other things in the past in terms of increasing interest rates and so on but that doesn’t really seem to have worked — figures have shown investment borrowing has charged ahead at fairly healthy levels,” he said.
“So it is not entirely unsurprising that the banks are trying something else if they are getting heat from the regulators, but this announcement is quite stringent.”
“For new borrowers, it is difficult to see an issue. A bank can set their eligibility criteria however they want, and if you can’t go with Bankwest, you can go with somebody else,” he told News.com.au.
“But the really troubling aspect is the retrospective aspect which is going back and looking at existing borrowers. If you are a borrower that went into Bankwest and took out a loan with them on the basis you would be reliant on these tax benefits of negative gearing to help finance the repayments, you could find yourself in a very awkward position if they reassess your credit worthiness.”