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Bankwest cuts negative gearing benefits from home loan assessments

Monday, 13 Feb 2017 06:13:17 | Michael Janda

Regulators would be concerned about a recent pick up in property investor lending. (Audience submitted: Edwin Almeida)

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 appears to be hitting up against 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.

Bankwest said the change affects all new applicants and any existing customers who may require a new serviceability calculation after February 10, 2017.

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