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Mortgages

Mortgage Rates Daily Commentary
Tuesday 23 July 2024  1 comment
Pre-approvals not turned off; Shared equity could be the answer

Earlier today we reported four banks had stopped issuing pre-approvals. We have been contacted by a couple of the banks to say that is not so.

ANZ says it "has not paused pre-approvals". Likewise, Westpac says "Westpac hasn’t turned off pre-approvals."

Meanwhile, we have a new story where Deloitte reports shared equity schemes could arrest declining home ownership. [READ ON]

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Increased capital requirements 'could make loans more expensive'

Banks may soon have to hold more capital to offset high loan-to-value home lending, the Reserve Bank has indicated. And one expert says that may lead to higher interest rates.

Tuesday, March 26th 2013, 11:46AM 1 Comment

The Reserve Bank is reviewing the housing loan capital adequacy requirements for New Zealand banks and has released a consultation paper.

The requirements dictate how much a bank must have set aside to cover potential losses from mortgage lending.They are reviewed periodically.

Deputy governor Grant Spencer said the Reserve Bank wanted to ensure the requirements adequately reflected the risks involved in lending to the housing sector. "The bank is proposing higher capital requirements for high LVR loans."

The paper says borrowers with high LVR loans are more exposed to systemic risk than those with low LVR lending. "If economic conditions change for the worse, and in view of the current state of the housing market, there is a risk that borrowers most exposed to adverse changes in general economic conditions could all come under pressure at the same time, with a corresponding impact on the quality of banks’ housing loan portfolios. This is an important motivation for reviewing the balance between systemic and idiosyncratic risk within banks’ housing portfolios."

He said it made sense to get the requirements right before the Reserve Bank's proposed macroprudential tools kicked in.

Claire Matthews, of Massey University's Centre for Banking Studies, said permanently higher capital ratios would probably make home loans more expensive. She said one of the drivers in setting interest rates was covering the cost of holding capital. "This is likely to put up interest rates."

But she said Basel II had dropped capital requirements and this could in effect just return them to where they were. "Housing loans have had lower capital ratios because recent history has shown that home loans don't carry a lot of risk. There is some default but the rate is not high and is lower than other forms of lending."

Submissions are open until mid-April.

« Kiwi banks ranked in top 25Customers switch banks at twice normal rate »

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Comments from our readers

On 27 March 2013 at 1:08 pm Richard said:
This is smart policy - and the best way to keep check on the out of control housing market in Auckland in that it does not affect other industries like an OCR increase would.

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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 7.14 6.75 6.39
ANZ 8.64 ▼7.45 ▼7.09 ▼6.95
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - ▼6.85 ▼6.49 ▼6.35
ASB Bank 8.64 ▼6.85 ▼6.49 ▼6.35
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 - ▼6.85 ▼6.49 ▼6.39
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 ▼7.45 ▼7.09 ▼6.99
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 - ▼6.59 - -
Co-operative Bank - Owner Occ 8.40 ▼6.79 ▼6.49 ▼6.35
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 ▼7.29 ▼6.99 ▼6.85
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 ▼6.35 ▼6.15
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 ▼7.50 ▼7.25 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 ▼7.75 ▼7.39 ▼7.19
Kiwibank - Offset 8.50 - - -
Kiwibank Special - ▼6.85 ▼6.49 ▼6.39
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 ▼7.65 ▼7.29 ▼7.19
TSB Special 8.64 ▼6.85 ▼6.49 ▼6.39
Unity 8.64 ▼6.85 ▼6.49 -
Unity First Home Buyer special - ▼6.45 - -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 6.89 6.75 6.39
Median 8.64 7.12 6.85 6.39

Last updated: 24 July 2024 9:31am

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