Westpac dumped from First Home Loan Deposit Scheme

Photo by Aaron Barnaby on Unsplash

In what is turning out to be a very bad week for the bank, Westpac has allegedly been axed as the second major lender for the governments’ First Home Loan Deposit Scheme over reputational risk concerns.

News Corp reports Westpac insiders told The Australian the bank had expected to be approved as the second major lender for the scheme, but understood it would now be excluded in the wake of money laundering allegations against it.

On Tuesday, NAB got the green light from the National Housing Finance and Investment Corporation (NHFIC) to support the scheme.

The Australian understands Westpac’s bid was one of the two best applications reviewed by the NHFIC under strict evaluation criteria, one of which included “the reputation of the respondent”.

According to NHFIC’s request for proposal, lenders were asked to provide details of “any regulatory matter (in the last five years), or any other matter that has had or may have a material adverse effect on the reputation of your organisation. This includes any claims, litigation or threatened litigation and any investigation or adverse findings”.

Westpac has been accused of 23 million money-laundering breaches by watchdog AUSTRAC, some of which may have funded child exploitation in Southeast Asia.

Looking for a low-rate variable home loan? The table below displays a selection of variable-rate home loans on offer, featuring a low-rate pick from each of the following three categories: the big four banks, the top 10 customer-owned banks, and the larger non-banks.

Westpac’s chief executive officer Brian Hartzer will step down on December 2 in the wake of the scandal.

The government is expected to now choose between either Commonwealth Bank or ANZ to participate in the scheme, with a decision on the second major bank and approved non-major bank lenders expected to be made by the end of the year before the scheme kicks off on January 1 2020.

The big banks could only be entitled to receive up to half of the 10,000 guarantees allocated each financial year, while a range of non-major lenders will receive the other half.

Housing Minister Michael Sukkar said this is to keep the home loan space competitive.

“These rules are designed to ensure the Government’s expectation that smaller lenders play a significant role in the First Home Loan Deposit Scheme to boost competition is met,” Mr Sukkar said.

The scheme, one of Prime Minister Scott Morrison’s key pledges at the May 18 election, allows some first home buyers to secure a home loan with a 5% deposit and not have to pay for lenders mortgage insurance (LMI). The NHFIC would then guarantee the rest of what would normally be a 20% deposit.

Applicants will be subject to an income threshold of up to $125,000 for singles and a combined income of $200,000, provided both individuals are first home buyers.

Property price caps will also apply under the scheme to reflect the median house prices and stamp duty concessions in each of the states and territories.

Savings.com.au has reached out to Westpac and NHFIC for comment.

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Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

• The big four banks are: ANZ, CBA, NAB and Westpac
• The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
• The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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