Customers 'will be disadvantaged'
Some businesses and householders will be adversely affected by loan-to-value restrictions, says the New Zealand Bankers Association (NZBA).
Tuesday, August 20th 2013, 3:45PM 
4 Comments
by Susan Edmunds
The Reserve Bank has announced that from October 1, banks will not have more than 10% of their total loan books in mortgages to customers with equity of less than 20%.
Massey University banking expert David Tripe said that was a tighter limit than had been expected.
NZBA chief executive Kirk Hope said people needed to be aware that they might be declined loans because of the restrictions.
“While the lending restrictions will adversely affect some businesses and householders seeking low-deposit loans, our members are committed to meeting their obligations as registered banks and will comply with new lending requirements.”
He said many small businesses used the equity in their homes to raise capital and the restrictions could make that difficult. “The lending limits may also make it more difficult for first-homebuyers and home-owners seeking a top-up loan for renovations.”
Westpac referred inquiries to the NZBA. Kiwibank said it would prioritise loan applications from first-home buyers over those from investors in the same equity position.
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Comments from our readers
All that's going to happen is that NZ based 1st time buyers will be disadvantaged. The property prices won't change as demand from overseas will be unchanged. Capital Gains Tax is a neater solution.
The Government seems unwilling to address the issue of foreign buyers inflating the value of Auckland property prices. Until they do Kiwis (existing homeowners or 1st home buyers) will keep missing out to overseas purchasers at auction who have plenty of cash and don't even need a mortgage. Meantime the Reserve Bank is now practically saying to all wealthy overseas investors go buy 10 properties in Auckland and become a very wealthy landlord renting out housing to Kiwis in their own country. Well done Dr Wheeler!
If we don't sell them houses (or allow houses to be used as collateral since they can never own them), we have to sell them something else.
Of course, if we stopped running balance of payments deficits, we would not have to sell off assets. But alas, NZers seem to want to buy things they can't afford. Houses being a large part of that.
This is the problem with economics - everything is inter-related.
Tackling a problem in the most obvious way often has unintended consequences elsewhere, and is often not the real solution. I suspect Wheeler understands this.
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