Westpac has agreed to pay a $35m fine for failing to properly take into account customers’ living expenses when assessing their ability to repay home loans.

The bank admitted breaching its responsible lending obligations when providing home loans to settle court action taken by the Australian Securities and Investments Commission.

On Tuesday Asic said that if approved by the federal court, it would be the largest civil penalty awarded under the National Credit Act.

It comes a week after Westpac became the first of Australia’s big four banks to life interest rates out-of-cycle, when it announced a 0.14% increase in its variable interest rates for owner-occupied and residential investment property loans.

On Tuesday the Reserve Bank left interest rates unchanged at 1.5%, for the 25th month in a row. Its governor, Philip Lowe, said wages growth had finally “picked up a little”.

Lowe again called out weak household spending as a source of uncertainty for the economy and a factor in the RBA board’s decision to leave the official interest rate at its current record low.

But he was slightly more upbeat in his commentary on the economy, noting that unemployment rate has fallen to its lowest level in almost six years at 5.3% and was expected to further decline in the next couple of years to about 5%.



