By Gareth Vaughan
Westpac New Zealand appears to be putting its money where its mouth is with 92% of the bank's March quarter residential mortgage growth coming in loans where the borrower has a deposit, or equity, of at least 20%.
Westpac's General Disclosure Statement (GDS) for the six months to March 31 shows home loans grew by NZ$571 million in the March quarter to NZ$36.462 billion. Of that, NZ$523 million, or 92%, came from loans with loan-to-value ratios (LVRs) of less than 80%.
The focus of Westpac's growth contrasts with that of ASB, the only other bank to have issued a GDS covering the March quarter thus far. ASB grew home loans by NZ$791 million with NZ$565 million, or 71%, of the growth coming from loans where the borrower has less than 20% equity.
Westpac recently introduced a low equity fee for lending on mortgages with LVRs between 80% and 85%, meaning all new residential mortgage lending with LVRs in this range now have a 0.25% margin added to the carded/agreed loan interest rate. The bank already had low equity fees in place for mortgages with LVRs above 85%.
Earlier this month Westpac CEO Peter Clare told interest.co.nz his bank's focus on home loans where the borrower has at least 20% equity is because its internal risk modelling suggests increased market volatility and therefore higher risk.
However, Clare added that Westpac hadn't pulled back from 80% plus LVR lending.
"We've just said that if you borrow between 80% and 85% there is a 25 basis point additional margin."
The percentage of Westpac's residential mortgages at LVRs over 80% fell slightly to 23.56% at March 31 from 23.80% at December 31 last year. ASB's grew to 22% from 21%.
The Reserve Bank recently moved to make the big four banks - ANZ, ASB, BNZ and Westpac - hold an average of 12% more capital against their housing loans to help cover potential losses from high LVR lending. This adds up to about NZ$500 million between them, or an average of just NZ$125 million each.
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