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Servicing tests hinder home loan market

Tough servicing tests continue to hinder the home loan market, leaving borrowers unable to tap into attractive headline interest rates.

Friday, July 17th 2020, 10:11AM 3 Comments

by Dan Dunkley

Economist Tony Alexander

Economist Tony Alexander, points to "apparent bank reluctance to ease servicing criteria" in the New Zealand market, in his latest weekly report.

However, Alexander believes there could be good news on the way for borrowers, with increased competition in the home loan market, and possible cuts in one and two year rates in Spring.

The independent economist's latest survey of the property valuer market reveals volumes of enquiries for house valuations have risen by 50% in July.

The data backs up strong REINZ figures, which revealed a stronger-than-expected property market in June.

"Enquiries for valuations to support the refinancing with a new lender of a currently mortgaged residential property have increased," Alexander said. "But they have decreased for commercial property.

"This makes sense in that there is no evidence to date of any large decreases in residential property values, listings remain in short supply, and there is plentiful evidence of many buyers in the marketplace."

Yet servicing continues to hamper the borrowing market, despite record-low rates and banks pushing out more attractive headline rates.

Advisers say there is a greater disparity between the real rate and the test rate, which is as high as 7% at some major lenders.

Banks continue to put out headline grabbing offers. Yesterday, ASB slashed rates for high LVR borrowers, moving all customers to its 'special' rate.

Advisers welcomed the move, but say banks need to do more to lower their servicing tests, so customers can access financing.

David Green of AdviceHQ, hopes banks will address the servicing test problem in the coming months. "The disconnect between advertised rates and test rates still remains, more so with low deposit first home buyers," he told landlords.co.nz's sister publication, TMM Online.

Tags: ASB banks demand home loans housing market interest rates investment Lending LVR mortgages property investment real estate Tony Alexander

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Comments from our readers

On 20 July 2020 at 8:30 am Chris Slater said:
Extreme reluctance from Kiwibank to extend my line of credit to match the increase in house value since 2005. The reason given is my main source of income is superannuation, which they wrongly think is inadequate to service the loan. Never mind that with investments in the share market I could pay off double what I owed to Kiwibank within three working days should its receivers demand it. So it's limiting market investment as well as property investment.
On 20 July 2020 at 10:39 am nakiboy99 said:
Tony, please give us your thoughts on the reasons why banks are reluctant to ease servicing criteria. Not sure why your article missed such an important part of the topic?
On 20 July 2020 at 11:26 am Chris Slater said:
Extreme reluctance from Kiwibank to extend my line of credit to match the increase in house value since 2005. The reason given is my main source of income is superannuation, which they wrongly think is inadequate to service the loan. Never mind that with investments in the share market I could pay off double what I owed to Kiwibank within three working days should its receivers demand it. So it's limiting market investment as well as property investment.

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.94 - - -
AIA - Go Home Loans 8.49 6.35 5.79 5.79
ANZ 8.39 ▼6.79 ▼6.29 ▼6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - ▼6.19 ▼5.69 ▼5.69
ASB Bank 8.39 6.35 5.79 5.79
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.90 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - ▼6.19 5.79 5.79
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 8.44 - - -
BNZ - Rapid Repay 8.44 - - -
BNZ - Std 8.44 6.45 5.89 5.79
BNZ - TotalMoney 8.44 - - -
CFML 321 Loans 6.70 - - -
CFML Home Loans 6.95 - - -
CFML Prime Loans 8.75 - - -
CFML Standard Loans 9.70 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.15 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 8.15 6.35 5.79 5.69
Co-operative Bank - Standard 8.15 6.85 6.29 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - ▼6.60 ▼6.10 -
First Credit Union Standard 8.50 ▼7.20 ▼6.70 -
Heartland Bank - Online 7.99 6.69 6.35 6.15
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC ▼7.49 ▼6.15 ▼5.69 ▼5.69
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 8.25 7.19 6.69 6.59
Kiwibank - Offset 8.25 - - -
Kiwibank Special - 6.29 5.79 5.79
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.75 ▼6.69 ▼6.19 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.49 ▼7.05 ▼6.39 ▼6.39
SBS Bank Special - ▼6.45 ▼5.79 ▼5.79
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.94 ▼5.45 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
TSB Bank 9.19 ▼7.09 ▼6.59 ▼6.59
TSB Special 8.39 ▼6.29 ▼5.79 ▼5.79
Unity 8.64 ▼6.29 ▼5.79 -
Unity First Home Buyer special - 6.20 - -
Wairarapa Building Society 8.50 6.65 5.99 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 8.44 6.53 6.10 5.79

Last updated: 4 October 2024 9:35am

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