The bank follows similar move from ANZ
ASB has now stopped offering new home loans to customers with deposits of less than 20% – the second big bank to do so after ANZ.
ANZ had earlier confirmed that it was taking a “pause” from issuing new home loans to people with deposits less than 20%, citing Reserve Bank limits on high LVR lending.
Read more: ANZ "pauses" low-equity lending
ASB told interest.co.nz on Tuesday that it had “temporarily” stopped offering new home loans to customers with an LVR of more than 80%.
At this point, other large banks don’t seem to be following the lead of ASB and ANZ, with Westpac, BNZ, and Kiwibank all saying they are still offering loans for those with deposits less than 20%.
“We currently have a full pipeline of customers who are pre-approved for a home loan with an LVR above 80% (less than 20% deposit),”an ASB spokesperson told interest.co.nz, as she explained that such a move was to ensure the bank continued to adhere to the RBNZ requirement to have no more than 10% of owner-occupied mortgage lending at this level.
“We’re continuing to document loans for customers currently in our pipeline with an LVR above 80% who find a property within their pre-approval timeframe, and we’re still taking applications from customers who meet the RBNZ’s high LVR exemption criteria (which includes lending up to 90% LVR for customers looking to build a new home),”the spokesperson said. “We will continue to assess our portfolio in accordance with RBNZ’s requirements and will look to recommence this type of lending as soon as we can.”
When asked about the demand they were seeing for low deposit loans at the moment in the rising interest rate/falling house price environment, an ANZ spokesperson said they “generally see a pretty steady demand for low deposit lending.”
“The rising interest rate environment and softening of the housing market has meant we’ve started to see a drop in demand for overall lending,” the spokesperson told interest.co.nz.
The move by the two big banks came at a time when house prices have already declined some 6% from their peak last November, and are expected to fall further, while mortgage rates are increasing, with most rates now above 5%.
Other banks, however, said they are still offering high LVR loans – though it’s clear this is subject to individual circumstances of customers.
A BNZ spokesperson said the bank has not changed its low equity settings “and continues to lend to customers with less than 20% deposit, depending on the specifics of the deal,” with “all lending decisions are made on a case-by-case basis.”
Westpac said it “regularly” reviews its housing book against the RBNZ LVR limits “and currently have no plans to pause lending to customers with deposits of less than 20%.”
A spokesperson from Westpac said the bank had “a number of options” available to support first home buyers with small deposits, including Family Springboard, Kāinga Ora First Home Loans, and Kāinga Ora First Home Partner. Customers could also choose to purchase a new build which is exempt from high LVR restrictions. According to the spokesperson, demand for high LVR lending has been “consistent” over the past couple of months.
Pip Maxwell, Kiwibank's senior product manager home lending, said the bank was “pleased to be able to continue to support” first home buyers with less than 20% deposit home loans through programmes such as First Home Loan, low equity new builds, and other homeownership pathways such as Co-own.
Read next: More Kiwis are pooling their resources to buy a home – Kiwibank
“For any over 80% LVR lending that is subject to RBNZ restrictions, we do prioritise Kiwibank customers who have us as their main bank and are looking to buy their first home,” Maxwell told interest.co.nz. “Our home loan specialists can help customers understand the various options which may be available to them."
