Banks to ‘cherry pick’ loans

NZ Herald 22 August 2013
New loan restrictions mean the “poor middle-class” hoping to buy their first home will be left out in the cold as banks cherry pick their ideal customers, mortgage brokers say.

However, borrowers wanting low deposit loans are being told not to panic because there are ways of getting around the Reserve Bank’s policy.

First home buyers with less than a 20 per cent deposit – considered a high loan-to-value ratio (LVR) – is about 12 per cent of banks’ new loans.

Overall, low equity loans comprise 29 per cent of the major banks’ lending. However, under the new limits, to come into effect on October 1, banks would have to restrict these loans to just 10 per cent of their new lending.

Commentators have predicted other banks will follow Kiwibank’s lead in prioritising first home buyers because they were valuable long-term customers.

But a Herald survey of the five major banks found only two – Kiwibank and ASB – would commit to who they would prioritise. Kiwibank said it would put first home buyers at the top of the queue and ASB said their first priority would likely be their existing customers.