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Banks are close to exhausting their Reserve Bank-mandated high-risk loan allowances. Photo/Getty Images
Westpac limits the availability of new mortgage pre-approvals to borrowers with less than 20% deposits.
He makes the decision after ANZ and ASB temporarily halted new mortgage lending to borrowers
with deposits of less than 20 percent.
All three banks acknowledge that they are running up against limits the Reserve Bank of New Zealand (RBNZ) has imposed on the amount of high-risk lending they are allowed to make.
The RBNZ’s loan-to-value ratio (LVR) rules require banks to ensure that no more than 10% of their new homeowner mortgages go to borrowers with less than 20% deposits.
Borrowers who need loans for new construction or non-current repairs, who need bridge financing, who want to transfer loans from one property to another, who need to refinance existing loans and who have need loans under Housing New Zealand’s mortgage insurance scheme, are exempt from the rules. .
It’s unclear exactly how close ANZ, ASB and Westpac are to exhausting their high-risk or high-LVR loan allocations.
But last month, 7.7% of new group mortgages from banks to homeowners went to borrowers with deposits below 20%, according to just released RBNZ data.
This figure was higher than the previous four months. For example, in March, only 3% of new homeowner loans went to borrowers with small deposits.
Banks had to tighten credit conditions relatively quickly earlier in the year, with the RBNZ on November 1 halving their high LVR loan allocations from 20% to 10%.
However, the data shows that banks started lending more generously to high-risk borrowers in May.
And now three of the country’s biggest banks are restricting (Westpac) or halting (ANZ and ASB) new high LVR lending.
A Westpac spokesperson explained, “Existing pre-approvals and applications already received will not be affected by the changes.
“In addition, new applications from existing Westpac customers seeking high LVR loans will still be eligible for loans if they present a signed sale and purchase agreement when applying for financing. This means that these applicants will not be able to buy unconditionally, i.e. at auction, on the basis of prior approval.
“Other options that are still available to all first-time home buyers with less than 20% down payment include Westpac Family Springboard, Kāinga Ora First Home Loans and Kāinga Ora First Home Partner.”
An ASB spokesperson explained: “We continue to document loans for clients currently in our pipeline with an LVR greater than 80% who find a property within their pre-approval timeframe, and we are still accepting applications. customers who meet RBNZ High LVR exemption criteria (which includes lending up to 90% LVR for customers looking to build a new home).
“We will continue to assess our portfolio in line with RBNZ requirements and seek to resume this type of lending as soon as possible.”
Similarly, an ANZ spokesperson said: “Customers with existing approvals are not affected until the expiration date, when we will need to apply the updated policy.
“The steps we are taking are a temporary measure and as soon as we can we will resume providing approvals for low deposit loans.
“ANZ remains open to all other home loans, including reduced deposit loans for new builds.”
BNZ and Kiwibank have confirmed they are not pausing new high LVR loans.
A Kiwibank spokesperson said the bank prioritizes customers who use Kiwibank as their primary bank, as well as first-time home buyers, when deciding how to use its high LVR loan allocation.
A BNZ spokesperson said: “BNZ has not changed its low capital parameters and continues to lend to customers with less than 20% deposit, depending on the specifics of the agreement. All lending decisions are taken on a case-by-case basis.”
Banks continue to require most residential real estate investors to have deposits of at least 40%.
The RBNZ only allows 5% of new investor loans to go to borrowers with deposits below 40%.