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Regulation 2013's big news: Report

Would-be buyers who have given up hope of getting into the property market because of the loan-to-value restrictions may be using their saved deposits to splurge on big-ticket items, the latest KPMG Financial Institutions Performance Survey says.

Tuesday, March 4th 2014, 6:00AM 1 Comment

by Susan Edmunds

The survey shows that profits rose 8.61% across the New Zealand banking industry in 2013, with an increase in lending assets of 4.35%.

But head of financial services John Kensington said regulation had been a big focus for banks in the past year and was the biggest threat to the industry’s “green shoots” over the coming 12 months.

“Before the LVR rule change the banks were probably writing 20% to 30% of their mortgages a month with a greater than 80%  LVR, now, they’re probably writing 4% to 6% of them with a greater than 80% LVR. There’s going to be spirited competition for anyone who’s a good loan.”

He said banks were now less likely to offer incentives such as “put your new car on the mortgage”, which was likely to push some of that consumer lending back to finance companies.

KPMG’s report said the rules had likely slowed rather than stopped activity but banking industry participants had suggested a number of possible unintended consequences.

One was that competition for homes in Auckland might be condensed into the $500,000 to $700,000 price range.

Another was that some people might decide they would have to be renters for life.

The report said:  “They may therefore be prepared to use deposit money for other things. If so, it may help to explain some of the economic upturn via expenditure at the end of the year, particularly where the finance companies sector saw a large increase in request for personal, boat, car and jetski-type of loans.”

The report said if the rules could avoid a price bubble until more supply came online, they would be a success. “If, however, they do not ease the house price bubble, and also keep people out of the market at a time when they could be investing, this would be undesirable.”

« Tide about to turn on low equity loansBorrowers still exposed to rates rises »

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Comments from our readers

On 6 March 2014 at 9:02 am Richard said:
The kneejerk reaction of introducing LVRs by the Reserve Bank has done Kiwis no favours. Effectively a whole generation of 'bottom-rung' starters have been wiped out from home ownership. If they aren't able to buy then prices rise and more property goes into foreign ownership. A massive 'Own Goal' by Wheeler.

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 ▼4.05 ▼3.95 4.49
ANZ Special - ▼3.55 ▼3.45 3.99
ASB Bank 5.20 4.15 3.99 4.39
ASB Bank Special - 3.65 3.49 3.89
BNZ - Classic - 3.65 3.49 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
Housing NZ Corp 5.19 4.15 4.09 4.39
HSBC Premier 5.24 3.35 3.35 3.35
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kiwibank 5.80 4.30 4.24 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.49 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.69 4.79 -
Resimac 4.50 4.86 3.89 3.94
Lender Flt 1yr 2yr 3yr
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.65 3.59 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 ▼3.49 3.59 ▼3.89
The Co-operative Bank - Standard 5.15 ▼3.99 4.09 ▼4.39
TSB Bank 6.09 4.49 4.39 4.85
TSB Special 5.29 3.69 3.59 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.34 - - -
Westpac Special - 3.65 3.49 3.99
Median 5.34 4.15 3.99 4.05

Last updated: 14 October 2019 3:04pm

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