ASB says customers who have received pre-approval for low equity home loans have until October 4 to draw them down.
"We are withdrawing all outstanding above 80% LVR (loan-to-value ratio) pre-approved loan offers with effect from 4 October 2013 in order to comply with the lending restrictions being implemented by the RBNZ," an ASB spokesman told interest.co.nz.
From October 1 all banks must restrict new residential mortgage lending at LVRs of over 80% to no more than 10% of the dollar value of their new housing lending flows. Allowing for exemptions the Reserve Bank estimates this 10% "speed limit" will effectively limit the banks’ high-LVR lending flows to about 15% of their new residential lending, versus the estimated 30% they've been doing in recent months.
Banks do, however, have six months to phase in the new restrictions meaning the first test of the LVR restrictions will effectively come at the end of March next year. The six month phase in is to help banks accommodate pre-approvals with the Reserve Bank saying some banks had pre-approved so many high LVR mortgages they would have breached any limits placed on high LVR lending straight away without a six month lead in.
Asked by interest.co.nz in August whether this had been a concern for ASB, CEO Barbara Chapman said it was a concern because the bank often didn't know exactly when pre-approved loans would be drawn.
The latest round of bank general disclosure statements showed, of the major banks, ASB comfortably had the highest quarterly net growth in high LVR lending at 73% of its overall quarterly home loan growth. For the June quarter Chapman estimated just over 20% of ASB's new residential mortgage lending came from high LVR lending.
What are the other major banks doing?
Interest.co.nz also asked the other major banks whether they will also cut off pre-approved high LVR loans at a specified date.
An ANZ spokesman said: "We continue to honour our existing mortgage pre-approvals and customer commitments. We also continue to consider new mortgage applications over 80% LVR within the new RBNZ limits and encourage people to talk to us about their individual circumstances and needs."
A Westpac spokeswoman said: "We are continuously monitoring and assessing the situation and will do what is required to comply with the Reserve Bank rules coming into effect on October 1."
A BNZ spokeswoman said: "Based on our current flows and historic conversion rates, we expect to be able to continue honouring existing pre-approvals. We encourage any customers with questions or concerns about their pre-approval to contact us for advice."
And a Kiwibank spokesman said: "Currently we do not have any plans to set a time limit for pre-approvals and we continue to prioritise first home buyers."
Meanwhile, the New Zealand Bankers' Association said the Reserve Bank had shifted the goal posts.
"Don’t take anything for granted. If you have any concerns about a pre-approval, we suggest you contact your bank and talk it through," the NZBA said.
6 Comments
I guess it can and it has.
My understanding a pre-approval letter is not a contract in law and has plenty of out clauses.
A contract needs an offer and acceptance which is part of loan documentation: in fact when I worked for BNZ our loan contracts were headed up Loan Offer and Acceptance.
Spot on Speckles.....I have always said the entire residential Auckland property market is rigged with the players being the big 4 banks, the National government, local property investors already with equity, overseas buyers, media ie NZ Herald !, real estate industry and the lawyers and accountants tagging along.
All this move has done for the Auckland market has restricted FHB's and that makes them tenants for longer... so locking them in for longer while overseas buyers with "cheep munny" and locals with equity just carry on.
Also why would you want to be a property investor in the Auckland market ....the returns are pitiful !! as you just can't rely on capital gain ...has any PI heard the term "positive cash flow" ???
And before everyone jumps up and down and says its the land were buying....well you gotta have the buyers for a house and land package at prices even higher than currently offered to make the deal work.
Best of luck everyone .....I'm just glad I haven't got all my eggs on one basket .....
What they have been doing is being conservative and assuming a 100% take up of all these preapproved high LVR loans, and if that happens then they would be at max high LVR lending for this rolling 6 month period already, so can not (and currently are not) offering new loans at over 80% LVR. They see themselves missing out on sure customers as they currently have to turn them down incase they get 100% take up of the already approved high LVR approvals.
Reality is most of these preaprovals won't turn into mortgages for asb, so instead of missing out on new customers for the next 6 months, they are cutting the current preapproved customers off. There new lending at over 80% will be targeted toward customers that they are sure will buy and not just dreamers who have been getting preapprovals for last 5 years and never buying anything.
Thats just my take.
In fact, where banks generally for there own risk management, require investors to front up with 20% deposit, they might actually let more investors buy at under 20% (prepared to take on more risk as the new RBNZ rules are making them play more conservatively overall) as they are the ones most likely to take not to muck around when they find a house.
The real hit will come for auckland auctions where preapproval is needed before bidding. Banks are unlikely to risk pre-approvals have a high degree of uncertainty around them (as puts them in same position as presently in, where they never know how many will go through and count towards there limit).
Definately more than one unforeseen consquence to these tweaks.
Any preapprovals that are given will also be of much shorter duration.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.