Finance Minister slams ASB move
Finance Minister Bill English has weighed in on ASB's decision to cancel preapprovals for borrowers with less than a 20% deposit, saying the bank has let them down.
Tuesday, September 24th 2013, 2:19PM 
2 Comments
ASB yesterday confirmed it was cancelling existing preapprovals unless borrowers used them by next week.
It said the move was necessary if it was to comply with the new loan-to-value speed limits, introduced from October 1. Banks will have to keep their new lending to borrowers with less than 20% deposit to no more than 10% of their total loans.
English said the bank had months to prepare.
ASB had been lending a greater proportion of low-deposit loans than the other banks and English said it seemed the bank had not been listening to messages from the Reserve Bank.
"Six months ago the Reserve Bank Governor was talking about bringing restrictions on low deposit loans and this seems to be the only bank that's got themselves in a position where they're letting down people who they gave approvals to."
So far, no other bank has indicated it will need to follow ASB's example.
ASB wants affected customers to get in touch. They will need to reapply for loans and the bank said some would need to reassess their deposits or the value of the houses they were buying.
English acknowledged that the LVR restrictions were causing some short-term pain to first-home buyers but he said they would benefit over the longer term.
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Comments from our readers
A very poor implementation of what could have been a targeted policy (ie LVR restrictions with first homebuyers exempted or LVR restrictions kick in if a property is over $500k for example).
ASB at fault here? They're trying to manage as best they can with this balls up.
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But it's not just first home buyers Mr English! It's ANYONE with a mortgage above 80% borrowing already that now wants to trade up to a larger property for their growing family. People's equity situation frequently worsens when they buy a larger home (i.e. they are borrowing more) so now thanks to these LVR restrictions they are going to be unable to purchase again leaving them stuck in their existing home.
I am starting to seriously despair at the Government's lack of intelligence on this issue which will affect now a large chunk of New Zealand households. Perhaps, just perhaps though the penny will drop before the next election. This might be a Reserve Bank initiative but we all know who voters are going to blame ultimately!