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Lending Policy Updates Feb 2017

By Corrine Hill

Pricing and fees

Differentiation between owner occupiers and Investors

Investors

Loan application fees are now charged by some banks

Interest only loans, application fee may apply

No interest rate discounts may apply and in some cases a loading on the rates i.e. 0.25

Revolving credit facility Limits reduced significantly

No cash contributions or very low amounts are now offered

Owner Occupied

Cash contributions reduced significantly, ( 0.50-0.65 ) of the loan amount, down from up to 1% of the loan amount

Interest Rate reductions reduced, max typically 0.50 off carded rates

LVR’s

Existing properties, owner occupied up to 90% ( 85% ANZ) demand way exceeds supply and banks are cherry picking these deals

New builds- Turn Key 95%, construction loans 90% (owner occupied) , BNZ will allow 90% for new build/Investors

Resimac – Will allow 80% 1st and 10% 2nd in behind

Existing properties, investments up to 60% (nationwide)

Existing house plus purchasing an investment (existing property) 80% + 60% LVR applies

Apartments – generally max 80%, BNZ is considering a change to 85%

Unconsented Works

Expect the banks to have an issue, if noted on the sales agreement. In some cases, if the Insurance Company does not put exclusion on the unconsented works this may satisfy the banks. In most cases they will want to see the issues remedied either before or post (with a solicitors undertaking if post settlement being a common approval condition)

Unconsented granny flat, some banks may allow evidence (by a certified electrician) that the stove has been removed and that may satisfy, the loan approval condition

1st Home Buyers subsidy

Up to $5,000.00 per applicant on existing dwellings and $10,000.00 per applicant on new builds. Minimum 3 years in Kiwi saver scheme, max purchase price $600k for existing and $650k for new builds

Leaky Builds

Banks may allow an existing loan to be transferred to a purchaser as long as the vendor and purchaser are with the same bank and the purchaser is to remedy the leaky build issue. On a case by case basis only.

Overseas Investors

Non-resident, self-employed – no lending is available

NZ Resident (no Visa restrictions), residing abroad (excluding Australia) self-employed – very difficult to get lending approved

NZ Resident ( no Visa restrictions) , PAYE, max 60% LVR income shaded up to 40%, depending on the lender

NZ Resident, resides in Australia – no restrictions should apply

NZ Residency (with restrictions) lives in NZ, some banks will apply lending restrictions

Responsible Lending Act

A full expenses budget is now required and needs to be verified by the mortgage adviser/bank staff. Parents as guarantors- a full application is required including supporting information and expenses budget.

Direction of Interest Rates

Market sentiment, over the past few weeks, is that the Official Cash Rate (OCR) is unlikely to either decrease or increase during the current year. This does not mean that mortgage rates will not change. Banks are under increasing funding pressure – their main source of funding is offshore and its cost has been increasing. Their alternative is to fund using retail deposits. In order to attract more funds, deposit rates will have to increase from their present 1.0 – 3.5% range. As funding costs are rising, then lending rates will have to increase. Mortgage rates have risen roughly a quarter of a percent so far this year, and are likely to increase by a further half a percent as the year unfolds, according to some commentators.

Banks are raising the default interest rate used to calculate clients debt servicing. Most lenders are using rates around the mid 7.00’s when assessing deals; this has risen by 0.60 base points in the past six months

Disclaimer: This information is current as of the 8th February and is subject to change. For an impartial and independent perspective, clients may prefer to deal with a mortgage adviser who can look at all options available across the banking industry.

Keith Jones

Mortgage Adviser, Loan Market, mobile 021 849767 email: keith.jones@loanmarket.co.bz

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