UDATE: All five leading retail banks require 40% deposit from property lenders

Thursday 21st July 2016

All five of the country's leading retail banks have acted early to introduce restrictions on lending to property investors as part of the Reserve Bank's bid to slow the heated housing market.

The central bank said earlier this week it intends having the new lending restrictions that required property investors to have at least a 40 percent deposit for loans in force by Sept. 1 and asked lenders to comply with the spirit of the new regulations immediately. These regulations extend and expand the demand for a 30 percent deposit on investment properties in Auckland introduced by the bank last year.

Last to the party was state-owned Kiwibank which said this afternoon it had "communicated the new restrictions to staff and will not accept applications that are not compliant with the proposed new speed limits".

Kiwibank said it will honour existing commitments made to customers and continue to "prioritise first home buyers and owner-occupiers as we have in the past.”

The statement followed the Bank of New Zealand, ASB Bank, ANZ Bank New Zealand also introducing the restrictions today. Westpac Banking Corp kicked off the early move when it announced its plans yesterday.

ASB said existing approvals and pre-approvals above the new 60 percent loan to value ratio would be honoured until their documented expiry date, while BNZ said "all investor home lending applications from today will require a 40 percent deposit".

ANZ, the country’s biggest lender, said it would extend the maximum loan to value ratio of 60 percent for property investors across New Zealand, after previously only requiring a 30 percent deposit in Auckland. It's also extended the 85 percent LVR in Auckland owner-occupied homes across New Zealand.

The bank said it intends honouring all existing pre-approvals but any renewals will be subject to the new policy.

ANZ' chief executive David Hisco yesterday said property prices in Auckland were over-cooked and the ending of the property boom will be “messy”.

He warned baby boomers who have become property investors are starting to see more and more rentals where the owner can't find a tenant or the rent doesn't cover the mortgage. In an article for the Auckland-based NZ Herald, he said, "it's a matter of when, not if, the market adjusts".

Hisco added that the central bank needs to go further and demand 60 percent deposits, which "will be unpopular amongst investors but it may end up doing them a favour".

BusinessDesk.co.nz

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