Economist says it wants to "expand market share while still meeting regulatory requirements"
ASB has made a splash in the home loan market by offering a 1.79% floating rate for new homes - the lowest floating rate currently on offer by a New Zealand lender.
The new Back My Build home loan is being offered to customers building a new home from scratch, or buying a home and land package.
The loan is using funds under the Reserve Bank’s Funding for Lending programme, and executive general manager of retail banking Craig Sims says this is part of ASB’s “commitment to use these funds for productive lending that benefits all New Zealanders.”
“We’re thrilled to be offering this very sharp interest rate to encourage more customers to consider new build options,” Sims commented.
“Our goal is for Back My Build to result in ASB issuing around a thousand additional new build home loans in the coming 12 months.”
“Housing supply is a huge issue for the New Zealand economy,” he explained.
“That is why we’re keen to give a leg-up to customers who want to join us in being part of the solution. We’ve deliberately chosen to make the offer available to both owner occupiers and investors in recognition of the role investors can play in making new, high quality homes available for Kiwi families.”
Customers who take out the Back My Build loan are also eligible for $2000 in cash back if their build incorporates ‘green design’ - something Sims says will incentivise energy-efficient housing.
The new variable rate will be available for three years from when a customer makes their first draw-down.
Speaking to Stuff, Infometrics chief forecaster Gareth Kiernan said the new rate could indicate that ASB is “struggling to do as much lending as it wants to,” given the recently reinstated LVR restrictions.
“This interest rate might be a way of trying to grow the bank's lending book and expand market share while still meeting regulatory requirements,” Kiernan said.
“I certainly haven't seen anything in wholesale markets to suggest that retail rates should still be heading lower.”
Meanwhile, Sense Partners economist Rosie Collins said this would be a “good move” as it would support new homes, rather than trading in secondhand houses.
“This is a small step, but any policy to support new builds is good,” Collins said.
“We desperately need to build more homes to solve our entrenched and worsening housing crisis.
“Most of the lending growth in recent years, particularly over the last year, has been overwhelmingly for buying and selling secondhand houses, rather than building new homes. Lending to construction hasn’t really increased since 2017, even though we need to build more. If the funding-for-lending programme makes it a little cheaper to build new homes, that is a good thing.”
