New lending restrictions for property investors


Two of the country's biggest banks have tightened up their rules for lending to property investors.

Westpac is no longer offering its special home loan rates to property investors. It is now offering them only to owner occupiers.

The bank says: "Changes by the Reserve Bank (RBNZ) in November 2015 required all banks to hold more capital for securities classed as Investment Property. This makes investor property lending more expensive for banks."

New Zealand's biggest mortgage lender ANZ is no longer making new loans to property investors buying apartments off the plans, or buying empty sections.

It has also changed another of its rules for Auckland investors, removing what is known as the combined collateral exemption.

Previously, investors could spread their equity across all of their properties. But new lending for investors can now total no more than 70 percent of the value of the property.

ANZ says: "We routinely fine-tune our lending rules to take account of current market conditions. As a responsible lender we want to make sure people are in a position to comfortably repay their home loans.

"The price of Auckland's houses is the result of more demand than supply. Until that is addressed the prices of Auckland houses will continue to be high. We're committed to helping Kiwis into their homes and we will continue to assist customers with their plans for home ownership. We'd encourage customers to talk to us about their home loan needs."

Mortgage Supply Company Director David Windler says it looks like the banks are taking it upon themselves to "slow it down a little bit, perhaps turn the tap off slightly, rather than having the Reserve Bank come and turn things off.

"I don't think it's a bad thing, I think it should even up the playing field a little bit and put back in place perhaps some sensible measures.

"They've got one eye on the Reserve Bank and are looking over their shoulder a little bit and going, well we don't want the Reserve Bank to come in with too draconian-a-measure because I think that will be something the banks won't want to have happen to them, they'd rather control their own destiny. "              

Recent figures show that more than 40 percent of mortgage loans are being made to property investors.

The Reserve Bank (RBNZ) is looking at the idea of introducing debt-to-income borrowing limits. This has already occurred in the UK where the Bank of England has restricted the bulk of lending to no more than 4.5 times annual earnings.

The changes by ANZ and Westpac are an example of the major banks self-regulating.

Could more changes be in store?

ANZ told Newshub that "RBNZ capital requirements mean there is a higher cost to banks for residential investment lending than for lending to owner occupiers. This is generally not reflected in the pricing of these types of home loans at present. However, as with other banks, ANZ keeps rates under constant review taking into account a wide range of evolving market conditions."

Over in Australia there is now a two tier lending system, with investors typically paying around 0.2 percent to 0.25 percent more than owner occupiers.

The Australian Prudential Regulation Authority told the banks late in 2014 that growth in loans to property investors shouldn't exceed 10 percent of their portfolio. It also stepped up the requirements for the amount of capital the banks have to hold against those investor loans.

Canstar says there is a difference of 0.25 percent for floating rates, with the average owner-occupier in Australia paying 4.44 percent and the average investor paying 4.69 percent.

For the fixed terms the difference between the rates varies from 0.21 percent for the one-year fixed rate to 0.18 percent for the five-year fixed rate.