McLean said the way houses were built in New Zealand — where wood gets delivered to a property and a dwelling is constructed — was "quite out of whack with most developed countries around the world" where prefabrication was more popular.
The banking industry hadn't helped, he said, because lenders tended to provide finance only once a prefab house was installed on site, but on a traditional build it would advance progress payments throughout a project.
McLean hoped the bank's pilot would make borrowing for a prefab house "streamlined, simplified and stress free" for builders and buyers.
Citing industry figures, he said prefabrication could reduce construction costs by 15 per cent and building time by up to 60 per cent.
"When the Government is trying to address the problem of a lack of affordable housing we think this is going to be a big solution," he said.
McLean said it was going to be hard for the Government's KiwiBuild scheme, which aims to build 100,000 houses in a decade, to deliver more affordable homes "with the old way we are doing things in New Zealand".
One of the builders involved in Westpac's pilot is Branderson Homes in Cambridge. Its owner, Steve Brown, said the bank's move was huge because "it's recognising the fact that there is this gap in the bridging finance".
Branderson Homes is about to invest in a new facility that will enable the company to build 14 transportable homes of up to 140sq m inside at once.
"That gives you a level of the confidence that I have in the industry."
Robyn Healey, administrative manager at Built Smart, the transportable home division of PLB Construction Group, said the pilot was a game changer for the prefab industry "as in the past banks have not approved lending for offsite builds".
"It will provide access to a whole new group of people striving to become home owners who in the past due financial lending restrictions were unable to access funding for offsite prefabricated homes," Healey said.
"This will have a huge impact by providing affordable, quality homes to a wide range of home owners. However, the banking industry including mortgage brokers and valuers will need to rethink the lending process in respect to offsite prefabricated builds to allow this pilot program to be successful."
The biggest advantages of a prefab house were reduced build times, quality controls, subcontractor and materials management, no delays or losses due to weather conditions or site security "ensuring completion dates are achieved".
"All this leads to significant cost savings to the client."
McLean did not believe lending on prefab housing was any riskier for the bank than with a traditional build.
The Australian-owned bank reported a 14 per cent lift in core earnings to $698m for the six months to March 31 while its net operating income rose 6 per cent to $1.16 billion.
McLean said the result reflected a strong underlying economy and targeted growth in key sectors.
"This is a good result across a range of business areas, despite a slowing housing market, a competitive deposit environment, and impairments moving back to more normal levels.
Westpac's net interest margin rose 19 basis points to 2.15 per cent as the bank grew its deposits faster than its loan book. Deposits rose 8 per cent to $61.6b and net loans grew 3 per cent to $79.1b.
Westpac's home lending grew 4 per cent to $48b while its business lending rose 3 per cent to $30b. Its operating expenses fell 4 per cent to $458m on the back of cost management and productivity gains.
Those gains included the closure of five branches in the six months to March 31 as the bank increased its self-service facilities.
Westpac NZ recorded a $27m impairment charge — a reversal of its $40m gain in its first half last year.
