Westpac are to be congratulated for introducing 30 years interest only mortgages. These will suit investors seeking cash flow, steady returns and lower costs. This type of mortgage may not suit home owners who want to create nest egg for retirement but at least a buyer/investor/home owner has choices instead of constantly ducking and diving, fixing, floating and re financing and every time more costs.
Westpac’s new 30-year, interest-only mortgage has been decried as irresponsible and likely to fuel property investor speculation.
Details of the new loan product were discreetly fed to mortgage broker channels in recent weeks. The offering is a major shake-up to the market, with the term three to six times as long as the maximum allowed by rival banks.
Wellington mortgage broker Simon Rule said the three-decade loan had surprised brokers and rival lenders, and was “disappointing” to see.
“You’re basically encouraging borrowers not to make any principal repayments on their mortgage whatsoever,” he said.
Once the term is up, borrowers can either repay the loan in full or switch to a standard mortgage, implying a total length of 50 years.
“You can get 50-year mortgages in America which mean you pretty much have a mortgage for life, which is not responsible at all,” said Rule. “I certainly would not be recommending customers do any more than 10 years interest-only.”
Westpac’s chief product officer Shane Howell said owner-occupiers were eligible, but not the target market.
“It’s really specifically geared towards investors . . . to give them the best opportunity to take advantage of the tax benefits,” he said.