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Westpac Banking Corp (ASX:WBC) just made it more difficult to get a loan

The monthly Corelogic house price released showed that Sydney house prices were down 0.6% and Melbourne house prices were down 0.9% during July 2018.

Westpac Banking Corp (ASX: WBC) is the country’s second largest lender and it has just tightened its credit controls in the face of scrutiny of the Royal Commission.

The bank runs a multi-brand approach with Bank of Melbourne, St George Bank, RAMS and BankSA.

I think the new rules change is an important move but may be too late with Australian household housing stress at an all-time high according to the latest Household, Income and Labour Dynamics in Australia (HILDA) survey.

According to the AFR, the new rules will take a closer look at total expenses and all forms of income used to service the repayments. It will also look at middle-aged borrowers’ retirement strategy – people over the age of 45 will need to give the bank details of the retirement or repayment strategy.

The housing party seems to be over

Owner occupiers, investors and banks have all done wonderfully over the past five years, but arguably the gains wouldn’t have been as strong if these rules had been in place the whole time.

Rising interest rates in the US seems to be spoiling the party across the world. House prices in London, Vancouver, Beijing and New York are also heading backwards.

A lowering interest rate made it easier for every borrower to afford the repayments, plus it pushes up asset prices. Doesn’t sound great for the newer buyers.

I believe that every lender should make sure that the borrower is able to make repayments. If they can’t afford the repayments then that could lead to some big losses!

Westpac is one of my preferred big four banks, but the grossed-up dividend of 9.2% is currently the only attractive part about Westpac shares for the short-term. I believe there are better growth options out there.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.