Traditionally, banks subject borrowers to stress tests to ensure they can comfortably afford mortgage repayments if interest rates were to increase by three percentage points above the applied rate.

So for instance, a variable-rate of 5.50% would be stress tested under a serviceability of 8.50%. 

As a result, this has posed a challenge for some borrowers looking to refinance with a more affordable lender as they don’t pass the new bank’s serviceability test at higher rates. 

This is where Westpac’s new refinancing policy comes into play.

From this week, Westpac will allow select refinancers who do not meet the bank’s standard serviceability test to undergo a “modified Serviceability Assessment Rate,” provided it exceeds the bank’s floor rate.

To be eligible for Westpac’s new “Streamlined Refinance,” customers must have a credit score of more than 650 and a good track record of paying down all existing debts in the last 12 months.

Borrowers must also be refinancing to a loan that has lower monthly repayments than their existing one. 

CEO and Co-founder of WLTH Brodie Haupt said Westpac’s decision to reduce its stress test is a welcome move, yet there could be wider implications that need to be considered.

“Westpac’s decision may set a precedent, leading to increased competition among banks and lenders in refinancing,” Mr Haupt told

“This could benefit borrowers struggling with high mortgage rates. However if stress tests become more lenient, APRA may review its rules to maintain market stability.

“This could affect the maximum loan amount that borrowers can qualify for, meaning lenders may apply stricter criteria when assessing loan affordability, resulting in some individuals being declined for their desired loan amount.” 

Even if you are eligible for Westpac’s new policy, Mr Haupt recommends shopping around and comparing other rates on the market that may offer a better deal.

Home loans involving interest-only terms, debt consolidation, or lender’s mortgage insurance (LMI) do not qualify for this offering.

The new adjustment applies to refinance applications within Westpac and its subsidiaries including St George, Bank of Melbourne, and BankSA.

Read More: Is it time to reduce the home loan serviceability buffer?

Since November 2021, lenders have been required to assess a borrower’s ability to cope with a 3% point rise in variable mortgage rates, under APRA’s rules. 

With over 880,000 ultra-low fixed-rate loans set to expire by the end of 2023, that means many borrowers could find themselves locked in a ‘mortgage prison’.

The RBA raised the cash rate by another 25 basis points this month, marking 375 basis points' worth of increases since this time last year. 

This means fixed-rate borrowers would go from an average interest rate of 1.95% p.a. to well over 5% p.a. - including the 3% stress test this would go up to 8%.

In February this year, APRA announced it would keep the 3% buffer in place for now, but that it was not “set in stone” should risks to financial instability change.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured Online ExclusiveUp To $4K Cashback
  • Immediate cashback upon settlement
  • $2,000 for loans up to $700,000
  • $4,000 for loans over $700,000
5.99% p.a.
5.90% p.a.
Principal & Interest
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
Principal & Interest
Featured Unlimited Redraws
  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

Image by Westpac

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