That decision requires the bank to measure a borrower’s capacity to repay the loan at a higher rate.

Will Ranken, Westpac general manager for home ownership, said: “Providing the support and finance to help buyers purchase their next investment property is a key focus of our lending strategy. We believe this change will provide a competitive proposition for investors looking to purchase their next property.”

The unrealistically high floor was detrimental to our operations — Peter Lock, Heritage Bank CEO

The offer covers new purchases, refinancing and loan variations, such as switching from principal and interest repayments to interest only. It does not apply to owner occupier loans, which will continue to have an interest only maximum loan to value ratio at 80 per cent.

Westpac Group is the nation’s largest lender to investors with more than 25 per cent market share, compared to about 24 per cent for its major rival, Commonwealth Bank of Australia, the nation’s largest overall property lender.

Other major lenders, such as ANZ, reduced investor deposits to 10 per cent in March.

Investor home loans grew at their fastest pace in almost three years and first-home buyers roared into action in August, according to Reserve Bank of Australia analysis.

But major banks continue to lose share in the housing market to non-bank lenders with CBA the only major to grow its mortgage book in August.


Westpac responded to government and regulatory pressure to boost scrutiny of loans over the past two years by introducing stringent tests on residential property borrowers' existing and future capacity to meet their repayments.

Other lenders, such as Heritage Bank, the nation’s largest mutual, has reduced its floor rate from 5.75 per cent from 5.2 per cent.

Chief executive Peter Lock said: "It is quite obvious the market is coming down. The unrealistically high floor was detrimental to our operations," Mr Lock said.