The non-bank lender will lend up to 75% of the loan to value ratio of a second home, minus first mortgage debt. Previously, the lender had provided loans up to a 70% LVR.
Core Finance said it had taken the decision after seeing some of the heat come out of the Auckland property market. Grant Donoghue, director at Core Finance, said: "A year or so ago, values rocketed and people got excited because they had equity they could borrow off. We decided the numbers weren't real, and pulled back to 70% until things calmed down. Things have been stable for a little while now, so we have decided to move back to 75% LVR."
Donoghue added: "The key with us is that we are doing big loans. Our competitors are capped at $50,000 or $100,000, but we could go up to $1m if we wanted to." Donoghue added Core Finance would now consider lending against homes in need of renovations and improvements.
Donoghue believes a pull-back from the major banks, and the government's decision to extend the bright line test from two to five years, have contributed to the slowing market: "It is certainly taking longer to sell and investors are taking a wait and see approach. It has all played a part in cooling the market. We feel the time is right to go to 75%, especially in the main centres, Auckland, Wellington and Tauranga, where there is less risk."
Donoghue believes non-bank lenders will continue to take business from banks as major lenders retain a conservative outlook: "Two years ago banks were writing a lot of business, now they are looking for excuses and finding them everywhere. The second mortgage market is getting busier, because people are having to look elsewhere."
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