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Bridging finance not an LVR issue

Warning that a lack of clarity around bridging finance under the new LVRs could impact on owner-occupiers is not relevant for investors, a leading mortgage adviser says.

Tuesday, August 9th 2016, 12:00AM

by Miriam Bell

Mortgage Express and Harcourts have called for the Reserve Bank to provide lenders with greater clarification about bridging finance for owner-occupiers under the latest LVR restrictions.

The Reserve Bank’s new LVR restrictions are aimed at property investors and require investors nationwide to have a 40% deposit, or equity, when applying for new loans.

Mortgage Express CEO Sarah Johnston said there is a reluctance among banks to approve open-ended bridging finance for home owners in the wake of the latest LVRs

“If an owner-occupier has bought before they selling their existing home, technically the second property makes them an investor and the new investor LVR ratio requiring a 40% deposit comes into play.”

If investor LVR rules are not applied to the bridging finance, there is a risk people could say they had been unable to sell the house to avoid being classed as an investor, she said.

“It’s very unclear and until that loophole is fixed there are legitimate owner-occupiers who are being shut of out the market.

"This is because the banks haven’t been given clarification on how to apply the new rules in a ‘buy before selling’ situation.”

Harcourts CEO Chris Kennedy agreed, saying the situation around borrowing seems extremely messy and unclear.

“In an extremely competitive market, homeowners often find themselves trying to buy before they sell to avoid missing out on their dream home.

“And without clarification around the rules, LVR restrictions appear to be effectively shutting the people out of the market they were designed to help.”

However, the Mortgage Supply Company’s David Windler didn’t think bridging finance would be a big issue under the new LVRs.

Windler said bridging finance is exempt from the LVR restrictions and that exemption is valid for owner-occupiers and investors.

As instructed by the Reserve Bank, banks are being careful to operate within the spirit of the new LVRs and this might mean they are a bit wary about open ended bridging finance, he said.

“Banks have never particularly liked doing open ended bridging finance.

"But closed bridge funding – where, for example, there is an unconditional contract on the first property but a month before settlement date on a second property - should be fine.”

In his experience, it would be rare for serious investors to get open ended bridging finance, Windler added.

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Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora ▲5.43 ▲4.57 ▲5.58 ▲5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 ▼5.14 6.05 6.15
TSB Special 4.79 ▼4.34 5.25 5.35
Unity 5.65 ▲4.80 ▲5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

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