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Interest-only lending changes loom

The Reserve Bank is "very likely" to introduce interest-only lending restrictions on investors as it aims to tackle the overheated housing market, according to CoreLogic. 

Tuesday, March 23rd 2021, 8:16AM

The Government has today announced a raft of sweeping reforms to rein in the housing market, and a number of measures to curb investor activity.

Ministers have promised to extend the bright-line test and remove the deductibility of interest payments from investor tax bills.

It looks like more changes are coming.

Interest-only lending is the next item up for review, with the RBNZ expected to report back on this in May.

In the firm's latest update, economist Nick Goodall (pictured), said similar curbs in Australia have had a significant impact.

APRA's interest-only ban saw interest-only lending drop from 40% of all loans to the mid-teens, where it has stayed even after APRA withdrew the ban. 

"Subsequently, investor activity, and value growth reduced," said Nick Goodall. 

"We expect something similar here as the bank implements policy to ask investors to make their investments stack up on current cashflow while paying off some principal, and not based on expected capital growth."

"With the possibility of debt to income caps also being introduced, it's clear the investor landscape is changing," said Goodall.

Mortgage advisers anticipate a significant impact on investors.

Craig Pope at Loan Market in Wellington said it would impact "more active" investors, "especially those with more than a couple of properties".

"Most prefer to have interest-only terms for cashflow and building their portfolio," he added.

"I doubt it will affect the mum and dad investors with one or two properties so much as they tend to pay principal and interest anyway.

"Given bank servicing rules are fairly strict it shouldn't make borrowing money any harder, but investors may struggle to build their portfolios if they can't have the interest-only terms they prefer. Some investors will likely sell down properties if they can't freely have interest-only terms," Pope added.

Tags: Bright-line test DTIs housing market interest-only mortgages Lending property investment

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.95 3.29
ANZ 4.44 3.10 3.50 3.84
ANZ Blueprint to Build 1.68 - - -
ANZ Special - 2.50 2.90 3.24
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.55 2.95 3.29
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.55 2.95 3.25
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 3.15 3.22 3.85
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 1.95 1.85 2.35 2.45
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 ▲2.29 ▲2.69 ▲2.99
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 3.34 3.34 4.14
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 2.49 2.49 3.29
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.69 2.99 3.29
SBS Bank Special - 2.19 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.29 - -
The Co-operative Bank - Owner Occ 4.40 2.49 2.89 3.19
The Co-operative Bank - Standard 4.40 2.99 3.39 3.69
TSB Bank 5.34 3.30 3.69 4.04
TSB Special 4.54 2.50 2.89 3.24
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.59 3.15 3.49 3.89
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.89 3.29
Median 4.54 2.68 2.99 3.29

Last updated: 29 July 2021 9:04am

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