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5 Comments
lending by aussie banks in nz has never been as lax as in usa, therefore, no significant adverse issues, similar to where total lax lending happenned (NINJA lOANS) will ever be here in this space. carry on business as usual and keep borrowing as long as you can afford it. keep things moving, with the proviso that you can afford it.
This is true, to some extent.
In 2003-2006 I was working for ANZ bank with some of the top people setting lending policy. They attended various international meetings and were freaking out about the lending policies the Americans were implementing. They were also saying how such policies were never likely to make their way into NZ. What were they freaking out about? 110% mortgages was the worst of them... but they were also deeply uncomfortable with interest only lending on retail mortgages to individuals and really anything less than 20% deposit. I remember hearing from the lending team at the time (customers/frontline bank staff would call them up) phrases like "We generally don't do less than 20% deposit, unless they have extremely good financials and will go above 20% in the next year or so". I also helped build the tools front-line lending staff would use to judge affordability. These would use rates far in excess of what they are now as "worst case scenarios" as floor rates.
Subsequently most of those people who freaked out about the lending have moved on, being replaced with people with looser ideas about what is "right". If you think the same things haven't been creeping into NZ banking, you are completely misinformed. Just look at the amount of interest only lending going on in the retail sector - it was 40% of all new lending when they started measuring it! Now it's crept back to 25-30% (https://www.rbnz.govt.nz/statistics/c32), still way too high and setting the stage for a banking crisis. At least (I haven't heard yet) of 110% lending...
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