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Activating DTIs and loosening LVRs - NZBA

The New Zealand Banking Association (NZBA) wants the Reserve Bank to loosen proposed debt-to-income (DTI) restrictions because of the internal conservatism of some banks. [READ ON]

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Property investors maybe subject to new income rule

Property investors with five or more rentals can, temporarily, breath a sigh of relief that their interest rates aren’t about to rise soon.

Friday, November 14th 2014, 9:01AM 1 Comment

The Reserve Bank has been looking at introducing new capital requirements which would essentially make a new asset class and mean banks had to have more capital for lending to what it considers professional property investors.

It has been consulting with banks on the new requirements, but has kept rolling back the start date.

Reserve Bank deputy governor Grant Spencer, confirmed, when releasing the latest Financial Stability Report, that work is still continuing on this proposal.

He said there had been "initial consultations" with the banks but there was a difference of views and treatment of residential property investors.

He said the central bank was trying to find the "most sensible" option and it maybe something different than what was earlier envisaged.

"We're not so sure that's the appropriate rule to adopt, it maybe an income rule," he said.

It appears the banks have been putting up strong arguments against this proposed change. Despite many requests banks haven’t been willing to, publicly, discuss what the changes will mean for property investors.

While it is expected that they would become commercial customers and be subject to higher interest rates and tougher equity requirements, no one has been willing to provide specific details.

It is a significant issue for investors as recent surveys have shown that landlords have been increasing the size of their portfolios. Also surveys, including the NZ Property Investor Magazine’s soon-to-be published lending survey, shows that if new requirements were brought it investors would be less likely to buy more property.

Part of the argument for a new set of rules, is that there is more risk involved in this sort of lending, but research shows that generally the equity levels within these bigger investment portfolios are prudent.

« LVR restrictions to stay for some timeKiwibank hits the brakes »

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Comments from our readers

On 14 November 2014 at 9:45 pm peacocke10 said:
The concept of imposing a higher interest rate on an investor based on the number of properties as the only criteria is ridiculous. The principle of this should be based on risk eg higher risk =higher rate. An investor with 10 properties and a 20% debt loading is a lower risk than an investor with one house with an 80% debt loading. In addition the size of the properties is a consideration. eg one investor with 3*6 bedroom properties versus another with 6*3 br properties.Basically it will never work-the only thing that does is the debt/equity ratio and the interest payments as a percentage of the income.There is no logic to basing the lending criteria and the interest rate on the number of properties owned.

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 ▼6.79 ▼6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 ▼7.29 ▼7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 ▼6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 ▼7.39 ▼7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 ▼6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 14 March 2024 9:32am

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