Westpac loan move an isolated case

  • 12/07/2016

None of the other major Australian-owned banks dominating New Zealand's residential mortgage market have immediate plans to follow Westpac's lead in scaling back the length of their interest-only loans.

On Monday, Westpac's New Zealand unit announced plans to cut its interest-only terms to five years from 15 years, citing the build-up in investor activity which is now accounting for 40 percent of turnover and has attracted the ire of policy makers.

Interest-only loans are typically geared for investors chasing capital gains.

The bank's rivals don't plan to follow suit, though BNZ and ASB Bank say their existing terms are already five years.

"We note the overall market proportion of new interest-only lending is at 41 percent - BNZ's proportion of interest-only lending is significantly lower than this," a spokeswoman said in an emailed statement.

"Our current policy is to allow interest-only lending to a maximum term of five years. However, under special circumstances by exception we may allow up to a term of 10 years."

ASB says its maximum period for interest-only loans is "generally five years, which has been unchanged for some time", while ANZ, the country's biggest lender, says it regularly reviews its credit policy to make sure it suits the market.

Last week, the Reserve Bank said it could roll out its existing restriction on highly-leveraged lending to Auckland residential property investors across the country by the end of the year, something the Bankers' Association has said would be reasonably simple given banks already have the systems in place.

Reserve Bank figures show interest-only mortgages account for about 41 percent of all new lending in May, up from 38 percent in January when it first started collecting the data.

Of existing home loans, interest-only mortgages totalled $60.82 billion as at March 31, or 28 percent of the $213.7b total loans.