By Gareth Vaughan
ASB, reticent in the past to lend on a high loan-to-valuation-ratio (LVR) basis to borrowers' purchasing apartments, has relaxed this policy for selected customers and is now prepared to lend around 90% of the purchase price, mortgage brokers say.
From being prepared to lend 70% of the money required for an apartment purchase, or even just 50% in the case of some smaller apartments, ASB is now prepared to go to 90%. However, mortgage brokers say the bank has not implemented this as a blanket policy, but rather will only do it for the "right clients."
"It's smart stuff. What they're doing is looking at the quality of the property, the quality of the client and doing an individual assessment, rather than a one size fits all approach. I wouldn't call that crazy credit policy, I'd actually call it quite smart. It's a lot more considered, but I guess you could say it has loosened up a bit," one mortgage broker, who didn't want to be named, said.
In comments attributed to Shaun Drylie, its general manager for retail products and strategy, ASB didn't specifically address interest.co.nz's question of whether it was now prepared to do 90% loans on apartments.
“We are constantly reviewing our lending criteria to ensure it remains appropriate," Drylie said.
"Every customer is assessed on a case-by-case basis depending on the individual borrower's circumstances. As a guideline, approval for loans on apartments will take into account a variety of factors including a borrower's ability to repay or service the loan repayments and the amount of their deposit and will also consider the size of the apartment, the size of the apartment building, and whether it is a purpose-built apartment or a conversion," he added.
Banks have been more nervous about lending on apartments in Auckland than houses following well documented leaky homes woes and losses on loans to overseas apartment buyers.
News of ASB opening up to higher LVR apartment lending comes after the bank's CEO Barbara Chapman told interest.co.nz last month that she wanted to grow ASB's home loan book in the year to June 2013. This came after parent Commonwealth Bank of Australia said its share of New Zealand housing lending fell to 21.6% at June 30 from 22.1% a year earlier.
Anecdotally some mortgage brokers say that after a super aggressive ANZ National Bank hoovered up NZ$1 billion worth of home lending in the June quarter, ASB has now come to the party and will likely record strong growth in the current, September, quarter.
"They (ASB) are defiantly on a bit of a surge," said one mortgage broker.
A good chunk of ANZ's June quarter growth is likely to have come from winning business off other banks given, according to Reserve Bank sector credit data, industry wide housing loans rose NZ$1.545 billion, or just 0.88%, to NZ$175.789 billion in the three months to June 30.
Speaking about the housing market more broadly, Drylie said ASB was ensuring it continued to offer competitive home loans in a tight market. Last month Chapman said ASB had been recording above market growth in its ASB branded residential mortgage book and was working to turn around its third party mortgage book, business it gets via Sovereign. Drylie added that over the past few months ASB had been "engaging with" its broker network and focusing on improving the customer service experience.
"This has seen improved levels of business in ASB's third party mortgage book,” he said.
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4 Comments
The banks keep banging on about their Loan to Value ratios, like they are a matter of fact and can be quantified. The loan part certainly can - it is based upon a legal contract of known duration and for a specific amount of money. The value however remains a mystery...... if they obtained proper valuations (from reputable valuers) for each property then we could have some confidence in the data. But more often than not, the 'value' is nothing more than something computer generated by QV or a sale & purchase agreement....
A contract price on its own only tells us what that person was prepared to pay. Obviously no other buyer saw the property as worth any more than that - otherwise the vendor would have accepted their offer. Who is to say that the purchaser acted prudently?? They may have paid too much - as happens frequently with recent immigrants or overly keen first home buyers.
If every other buyer only saw a property as worth $400k and a naive buyer agreed to pay $500k, does that mean its worth $500k? If the bank lends 90% of this or $450k, what happens when the buyer defaults?? Under your scenario the bank is protected, but in reality they have an LVR of 112% plus realisation costs. Obviously most transactions do approximate fair value on any given day - but who is to know how many and to what extent the banks are exposed??
You are quite right that valuers would use sales agreements as a basis for value, the difference being that they are typically comparing 6 - 10 sales which mititgates the risk of any one being non-bonafide. If one house in a street sells below or above expectations, that is considered a good/poor buy. If five houses sell the same way, that is called a market.
And that is why in some cases Banks will require an RV even at lending at 80% if thye have doubts as to the price in the market: they have a numbe rof tools to work this out from local knowledge of lenders (yes some banks still have lenders with local discretion to inbuilt scoring tools looking at QV's and comparable sales).
If in doubt they will get a RV but at times of low sales even registered valuers I spoke to struggled to make a cool on properties with confidence, but at the end of the day they had to to the best of their abolity as that is their job and profession.
My understanding is few banks lend to over 90% without an RV but there may always be exceptions and use of discretion.
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