Mortgage brokers say low deposit borrowers will take another hit, after Westpac introduced a two-tier lending system that will further shut them out of the housing market.
Westpac on Monday split its lending rates, so those with deposits lower than 20 per cent pay a higher rate.
One of the options for low deposit borrowers will leave them paying 7.1% on three-year fixed mortgages, compared with a 5.99% rate offered to people with larger deposits.
A mortgage broker director says one-off bank fees and low equity margins have been steadily going up since the Reserve Bank introduced new regulations in October.
Bruce Patten of Loan Market says Westpac's new two-tier system coupled with those increases will prove even more punishing.
Westpac general manager Ian Blair says the differential pricing is in response to the Reserve Bank restrictions on bank lending to people with small deposits which came into effect in October.
He says the move is designed to provide transparency for the bank's customers.