Housing NZ's Welcome Home Loan Scheme in the sights of ASB; ANZ, BNZ not joining

By Gareth Vaughan

ASB is mulling becoming the twelfth lender to join the Government's Welcome Home Loan Scheme.

"ASB’s membership to the Welcome Home Loan Scheme is currently under consideration," a spokeswoman for ASB told interest.co.nz.

Low equity loans made under the Housing New Zealand scheme are excluded from the Reserve Bank's restrictions on banks' high loan-to-value ratio (LVR) home loans. ASB was initially the hardest hit of the major banks when the high LVR restrictions were introduced last year, having to pull its above 80% LVR pre-approved loan offers.

Housing Minister Nick Smith last month announced the Co-operative Bank was joining the scheme, lifting the total number of lenders offering the first home loan product to 11. These include Westpac and Kiwibank. (See the full list at the foot of this story).

At the time Smith also said; “I am encouraging other banks to also join the scheme. I want as many New Zealanders as possible to have access to this Government assistance to buy their first home."

No plans for ANZ, BNZ to join

A spokesman for ANZ, meanwhile, told interest.co.nz the country's biggest bank has "looked at" the Welcome Home Loan Scheme and understand its merits.

"But (we) have not made the decision to enter at this point," the ANZ spokesman said.

A BNZ spokesman told interest.co.nz the bank has considered the Welcome Home Loan Scheme in the past. And due to the Reserve Bank's restrictions on high LVR residential mortgage lending, will continue considering it.

"However, we have no plans to enter into the scheme within the immediate future," the BNZ spokesman says.

Taxpayers, rather than the lender, effectively take the risk on loans made through the Welcome Home Loan Scheme because Housing NZ providers lenders mortgage insurance, as well as underwriting participating lenders. Loans made via the scheme are for owner occupied properties only.

Housing NZ's last annual report shows Kiwibank accounting for 40% of the scheme's loans "giving rise to concentration of insurance risk." The state owned bank's latest disclosure statement says it had $496 million worth of loans under the scheme as of December 31. Actual claims under Housing NZ's mortgage insurance scheme totaled $2.4 million in the 2013 financial year.

Banks that are in the scheme have been increasing their lending through it since the introduction of the high LVR restrictions. Tim Loan, SBS Bank's general manager for finance, told interest.co.nz in February SBS was tracking at approximately seven times the dollar value of welcome home loans compared with last year.

Last month Smith said Housing NZ had approved 1,091 loans so far this financial year, 250 more than the number of loans approved in the entire 12 months prior to that.

Last October, just as the Reserve Bank's LVR restrictions kicked in, the Government increased the house price caps for home buyers eligible for a Welcome Home Loan and dropped income limits. Smith said the changes were expected to treble the number of welcome home loans from 845 to 2,500 a year.

The house price cap had been $350,000 for Auckland, Wellington, Christchurch, Hamilton, Tauranga, Coromandel and Nelson. Elsewhere the cap was $280,000. Now the caps are $485,000 in Auckland, $425,000 in Wellington and the Queenstown Lakes region, and $350,000 for a range of other regions including Waimakariri, Porirua, Lower and Upper Hutt, Nelson and Tauranga. Income limits were also altered. These had been $85,000 for one to two buyers, and $120,000 for three or more buyers. They're now $80,000 for one buyer and $120,000 for two or more.

The deposit threshold was also changed. Previously it was 15% on lending over $200,000. Now borrowers must have a deposit equal to or in excess of 10% of the purchase price.

The Reserve Bank's high LVR restrictions mean banks must restrict lending at LVRs above 80% (where borrowers don't have a deposit of at least 20%) to no more than 10% of total new mortgage lending. This 10% limit excludes high LVR loans made under the Welcome Home Loans scheme, the refinancing of existing high-LVR loans, bridging finance or the transfer of existing high-LVR loans between properties, and new residential construction loans.

Last week the Reserve Bank said high LVR residential mortgage lending fell to just 5.6% of banks' new mortgage commitments for the six months to the end of March 2014 from 25% as recently as last September.

Here's the full list of lenders currently in the scheme

Kiwibank
Westpac
TSB Bank
SBS Bank
Heartland Bank
The Co-operative Bank
Nelson Building Society
Baywide Credit Union
First Credit Union
Credit Union South
Fletcher Challenge Employees Credit Union

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