Westpac announced changes to its lending rules, including an increase in the maximum loan-to-value ratio for interest-only investor loans.

Investors taking out an interest-only loan will now be allowed to borrow as much as 90% of their target property's value, reducing their deposit requirement to 10%.

This change will apply to new purchases, refinances, and loan variations.

Borrowers switching from principal-and-interest can also take advantage of the lowered deposit requirement. However, borrowers will need to adhere to the current switching policy — they will only be able to switch to interest-only repayments post 12 months of loan drawdown.

Westpac also announced changes to its Household Expenditure Measure (HEM) calculations. Referral to a separate credit review will no longer be required in instances where expenses are higher than 130% of HEM.

According to the bank, this change will deliver faster turnaround for loan approvals.

Westpac's subsidiaries, Bank of Melbourne, St. George and BankSA, will also adopt the changes to interest-only loans and HEM calculations.