Westpac bank has taken the extraordinary step of banning foreign buyers from getting home loans, saying there is too much "risk", while ANZ has also put restrictions in.
A Westpac spokesperson said it had "tightened policies in relation to lending and foreign income for non-residents", effective today.
Under the policy:
"In line with our responsible lending practices and ongoing review of lending criteria in a fast moving market, we have tightened policies in relation to lending and foreign income for non-residents," the spokesperson said.
"Verification of foreign applications is essential to meeting our lending criteria and obligations, but is operationally difficult in these cases.
"The tightening of policy reduces risk and will contribute to further strengthening our home lending portfolio with customers who we have a deep and long-term banking relationship with."
ANZ has taken similar steps, but not to the same extent as Westpac.
It says as part of a regular review of policies and processes, changes will be made around applications which rely on overseas income also effective from today.
"We are making these changes to ensure that ANZ is appropriately positioned in the current housing environment, taking into account supply pressure in certain areas," the bank said in a statement.
"We remain committed to helping customers into their homes and will continue to assist buyers with their plans for home ownership."
Under ANZ's new rules:
Labour's finance spokesperson Grant Robertson says the move is a recognition from the banks that there's a problem with the housing market - even before the Government has.
"This shows the banks are acknowledging the housing market is out of control and foreign speculators are playing a big role so they are limiting their exposure if it falls over.
"Meanwhile National has refused to even acknowledge there's a housing crisis and has its head in the sand over the involvement of foreign buyers in the market," he says.
Building and Housing Minister Nick Smith says banks are entitled to make their own decisions about whom they lend to and by what terms.
"What is very different is for the Government to regulate and to ban a particular buyer. We're making or housing policy decisions on the basis of best evidence. The evidence is that foreign buyers are a negligible impact on the New Zealand housing market.
"The fundamental issue for government is what is the evidence…about the impact of overseas buyers in the New Zealand housing market and the answer is diddly squat and for that reason it does not cause me concern," he says.