The fall-out from the Australian Prudential Regulation Authority push to slow down investor lending is continuing to have an effect on borrowers as even more changes to loan arrangements are announced.

According to the Australian Financial Review, Westpac last week notified mortgage brokers that it would be changing arrangements for interest only loans.

In a note sent out to brokers, the bank said it will be reducing the maximum time period for interest only repayments from 15 years to 10 years and that it will require borrowers to be tested on their ability to make full principal and interest repayments after the interest only period has ended.

Currently many lenders are testing the ability of borrowers to make principal and interest repayments over the full life of the loan, rather than over the time frame after the interest only period has ended.

In the note to brokers attained by the AFR, Westpac said the changes were necessary to ensure it met responsible lending requirements.

“These changes are required to ensure Westpac continues to apply responsible lending practices in assessing a customer's ability to service existing and proposed debts,” the note read.