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DTI cull good news for property investors

A lack of liquidity in the Auckland housing market is getting in the way of the “everyday business” of buying and selling houses, one broker says.

Wednesday, August 16th 2017, 6:00AM

by The Landlord

Prime Minister Bill English has ruled out allowing the Reserve Bank to bring in debt-to-income (DTIs) ratios and has suggested that it could be time for loan-to-value restrictions to be wound back, too.

He told media that while the LVRs were a matter for the Reserve Bank, it might be time to think about what economic conditions might allow for their removal.

It was pretty clear that the LVR policy, along with other factors, had contributed to a flattening off of house prices and has taken some pressure out of the market, he said.

There has been a significant drop in turnover, particularly in Auckland.

John Bolton, of Squirrel Mortgages, said the Reserve Bank had been trying to slow down a “runaway train”. “They were always going to apply some pretty hard brakes to that and they did.”

He said a number of levers had been pulled at once, including the bright-line test, restrictions on the use of foreign income to purchase and the need for an IRD number. Not enough time had been given to see the effect of those before the most recent round of LVR rules were imposed on investors.

The resulting lack of turnover meant that people who had to sell could face problems, he said. People were no longer able to buy a property before they sold.

“The property market has slowed while everyone sits on the fence.”

He said property investors would welcome the fact DTIs were no longer looming, While DTIs had not generally been applied to investors internationally, the Reserve Bank had said it wanted to capture them in New Zealand.

“DTIs would have been completely out of whack with the fundamentals of that market,” he said.

Investors were already being caught by the high interest rates used by banks’ servicing calculations, he said. A mortgage of $1 million, even across two properties, would require income of about $215,000 to pass servicing tests, he said.

Another broker, Glen McLeod, of Edge Mortgages, agreed they would have been problematic for investors. There had been questions about whether investors would have to rely solely on their rental income to satisfy the test, he said, or whether their personal income could be included.

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AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 ▼3.39
ANZ Special - ▼2.55 ▼2.69 ▼2.79
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone 4.44 4.44 4.44 4.44
BNZ - Classic - 2.65 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 3.19 3.49
SBS Bank Special - 2.79 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 ▼2.69 ▼2.75 ▼2.99
The Co-operative Bank - Standard 4.40 ▼3.19 ▼3.25 ▼3.49
TSB Bank 5.34 ▼3.35 3.49 3.79
TSB Special 4.54 ▼2.55 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.55 2.69 2.79
Median 4.55 3.19 3.22 3.39

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