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Lending times they are a’ changing

New Zealand’s lending environment has changed and investors need to approach it differently, ANZ’s head of mortgages has warned.

Thursday, October 20th 2016, 3:00PM

by Miriam Bell

Stories about the increased difficulties investors are facing when it comes to gaining finance are legion these days.

While the Reserve Bank’s new investor-targeted LVRs play a significant part in the changed environment, so too do the credit policies of the banks themselves.

Banks have been tightening up on their lending of late because they are facing certain pressures themselves, including the rising costs of offshore funding. 

ANZ head of mortgages Glenn Stevenson said that, at a banking industry level, there is concern over the gap between the amount of money being borrowed and the amount of money being deposited.

The growth of credit compared to the level of deposits is increasingly far apart and that can’t continue, he said.

“Those levels need to come closer together. Yet if interest rates drop further, it will be even harder for deposits to up the ante as their rate of return will be even less attractive to people.

“So we are seeing people leverage up to buy investment properties instead of opting for term deposits. It’s a vicious cycle and it’s not sustainable.”

Stevenson said the banking industry was adverse to the situation and this was contributing to the tighter lending policies on the part of the banks.

This means there has been a change in the lending environment for investors.

But many investors are not aware of this and are still looking at it in the way that it has been until recently, Stevenson said.

“They need to start thinking differently. Because the Reserve Bank and banks themselves are going to further tighten up the lending environment: the Reserve Bank with macro-prudential tools and banks with their credit policies.”

For investors, this means they need to be aware that the banks now apply stricter lending criteria and will apply the new LVRs to the letter – and they need to consider how this could impact on loan applications.

Mortgage broker Jeff Royle, from iLender, said there is little doubt that the banks have tightened up on their lending generally.

“They are ensuring that every box is ticked. And they are being very black and white about it all. An application either fits or it doesn’t. The banks aren’t taking a can-do approach.”

He has also had several clients who have received less funds from the sale of an investment property than expected because the bank had strictly applied the 60% LVR across their portfolio.

“It’s not just about the new LVRs though. Over the last year, all sorts of things have been happening and the cumulative effect is that the lending landscape has changed.”

The non-bank lending environment has started to change too, due to significantly increased volumes of applications, Royle said.

This has impacted on their turnaround times - as well as their approach to investors, with many now focused on small-scale, “mum and dad” investors as opposed to larger investors.

However, Royle said he wasn’t convinced the changed lending environment will force people to alter the way they invest.

“In New Zealand, due to the tax structures as well as a fear of the unknown, I can’t see a big change from investing in residential property. It is popular because it is a tangible investment and it has a lower risk profile than investing in shares, which can be volatile.

“Yet, as a general principle, diversifying your investment is good. Investors should try to have a balanced portfolio, with interests in areas other than just property.”

 

« Navigating the new LVRsDTIs not on the cards yet - RBNZ »

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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 ▼5.79 6.15
TSB Special 4.79 ▼4.34 ▼4.99 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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