Westpac bank announced it will vary its mortgage interest rates to borrowers who have less than a 20% deposit.
According to the bank, low equity borrowers will pay around 0.6% more in interest. They will be on 6.55% per annum fixed over two years compared to the standard rate of 5.95% per annum.
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The bank also announced a cut to its standard floating rate to 5.64% on new lending for those with 20% or more equity.
Spokesman Ian Blair said the Reserve Bank restrictions on high loan-to-value-ratio (LVR) lending had been a moving feast and a difficult process for all banks.
"But we’re there now and we’ve been going through a process of understanding where the demand is going to lie, understanding the new lending environment that we’re in in LVR," he said.
"Really, the move is designed to ensure that we provide complete transparency to our customers and potential customers as to what the price of borrowing is going to be," he added.
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By GlobalDataAccording to Blair, demand for high LVRs had dropped, but was still greater than the banks were allowed to supply.
