Kiwibank will not honour pre-approvals for low deposit home loans as banks scramble to meet new Reserve Bank imposed restrictions on high loan-to-value ratio (LVR) mortgages.
"Kiwibank is a responsible lender, and we take our obligations to abide by regulations and requirements seriously. We are empathetic to the challenge of first home buyers and the desire of the Government and the Reserve Bank of New Zealand (RBNZ) to address strong market dynamics. The constraint we face is that to meet RBNZ loan-to-value ratio restrictions for owner occupied lending, for the time being Kiwibank is unable to accept pre-approval applications over 80% which do not meet the regulator’s exemption criteria," a Kiwibank spokeswoman says.
Kiwibank is accepting preapprovals for loans where it had already accepted a specific property when a bid or offer was made or accepted before Friday evening, November 12.
Against the backdrop of a red hot housing market, the Reserve Bank recently tightened LVR restrictions on lending to owner-occupiers in a move designed to reduce risky mortgage lending. Exemptions to the restrictions include for new home construction.
"From 1 November 2021, we will be restricting the amount of lending banks can do above an LVR of 80% to 10% of all new loans to owner-occupiers, down from 20% at present, RBNZ Deputy Governor and General Manager for Financial Stability Geoff Bascand announced in September.
Back in 2013, when the RBNZ first introduced high LVR restrictions, ASB took a similar step to what Kiwibank's doing now.
Aside from Kiwibank, interest.co.nz has heard other banks are also tightening up.
One suggestion put to interest.co.nz was that BNZ may be struggling to stay within the required speed limit. Asked about this a BNZ spokesman says; "With the new changes coming into effect and an active property market, we are continuing to look at a range of measures to ensure we remain within our regulated limit."
An ANZ NZ spokeswoman says the country's biggest bank is still lending to existing customers with less than a 20% deposit.
"However in order to ensure we can continue to support our own customers, we are currently not accepting applications from customers from other banks," the ANZ NZ spokeswoman says.
An ASB spokeswoman says the bank's continuing to lend to ASB customers with deposits under 20% who meet its lending criteria.
"And we are actively managing our home lending pipeline in line with the new LVR restrictions introduced on 1 November," the ASB spokeswoman says.
A Westpac NZ spokeswoman says the bank constantly monitors its position to ensure it's operating within the Reserve Bank speed limits, but hasn't withdrawn any existing preapprovals at this stage.
"We have remained consistent with our LVR settings since before the RBNZ suspended LVR controls in April 2020. Our current settings still meet the new restrictions that came into effect on 1 November 2021, however we will adjust these in need to ensure adherence to the LVR controls," the Westpac NZ spokeswoman says.
As a macro-prudential tool, LVR restrictions are a condition of banks' registration with the RBNZ, and are thus taken very seriously.
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38 Comments
I don't know whether these clowns have basic education or not, a high school pass-out can tell you the impact of lowering both interest and LVR on the housing market.
Lowering LVR is nowhere directly related to keeping unemployment down. After one year of total carnage, these guys still playing the game of passing the files for DTI implementation.
They claimed at the time it wouldn’t cause a burst of high risk lending. Now, after the fact, when their actions did cause a bunch of high risk lending, they are now running around “warning” people about irresponsibly taking on too much debt.
You couldn’t make this shit up
If you are unwilling or unable to be a bag holder for the great New Zealand property bubble you should start planning your OE or emigration.
After a short time away you will quickly come to realise that being a lifetime debt slave for a lousy house here is not the pinnacle of achievement.
Quite the opposite in fact.
I am not sure exactly when, that will depend on construction timelines and my evolving remote working plans for the European summer.
Rest assured I am sleeping more peacefully about how awful this place and some of the people in it have become as it's now just a transitory issue for me.
I pity the poor bastards that feel obligated to stick around.
I for one am taking Brock's advice and we will be leaving around September 2022. We'd love to go right now, but these things take time. Work, contract obligations, kids/family, covid, seasons, visas, savings etc.
It's easy for to scoff at people trying to leave. I wonder if that's because you've done well from the current situation, or you haven't but plan to stand around with your dick in your hands accepting the it.
Good on you!
NZ is a great place to live but in you're position where you can work in Europe then I'd jump at that in a heartbeat if I was half my age.
Hopefully NZ will always be home for you but there is a lot more to life than this place if you didn't have the luck of being born before about 1990 and buying a house at the first possible opportunity.
I read this issue yesterday and I'm struggling to understand how Kiwibank got here. The change to the LVR's for first home buyers was announced in early August- over 3 months ago.
Pre-approvals are usually only for 3 months - so all first home buyer pre-approvals would have expired since these changes have been announced. Why then didnt kiwibank make it a requirement for a 20% deposit for all pre-approvals from when the policy was announced ie in mid -august.
Am i missing something or did they think the RBNZ would change their mind
I found Kiwibank an absolutely abysmal bank to deal with, extremely slow. Got shafted at the last minute by them for a home loan approval around ten years ago, with next to no explanation as to why the situation had changed from my initial pre-approval. Thankfully another bank was more accommodating. From memory it was for a loan at 4x gross income.
Dropping LVR was clearly a mistake. One wonders now that its back, and banks are enforcing an unofficial DTI, what will happen to house sales. Formal DTI inbound, speculators not selling to avoid tax, investors increasingly limited access to debt, first home buyers all but priced out, and supply coming on strong with questions circulating on whether buyers can meet the new rules to settle on completion. The next six to twelve months will be telling.
That said listings continue to fly of the shelves at increasingly crazier prices, but reducing numbers.
Be quick or risk your plans dashed!
Why is media lobbying for cheap and easy money with high leverage.
Whenever their is fear that situation has reached to a point where even their friendly rbnz governor will not be able to manipulate - lobbying start.
Does Mr Orr needs lobbying to support ponzi ....lol
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