DTIs will be hard on start-ups

Many small to medium enterprise (SME) owners borrow against their home for their business.

Squirrel Mortgages founder John Bolton says it has been a problem for a long time. “It has been a problem with loan-to-value (LVR) restrictions and it will be a problem with DTIs.

“It is even a problem with how banks approach residential lending generally. The SME market is a neglected segment that is not well catered for by the banks. And the RBNZ doesn’t really think about that when it is gearing up for new macro-prudential policies. It is a market both the banks and RBNZ have to be careful about.”

Bolton says the real problem with DTIs will be start-up businesses that might be losing money initially. “How is a DTI calculated for the start-up owner who has a home but a business that is forecast to make money but it is not making money immediately?