Banks keen to lend on 10pc deposit
A move to relax loan-to-value ratio (LVR) restrictions has altered the mortgage market, a broker says.
As of this year, banks have been able to lend 15 per cent of their new lending to borrowers with deposits of 20 per cent or less of a property purchase price. That is compared with 10 per cent under the previous rules.
Property investors also now need only 35 per cent, compared with 40 per cent under the old rules.
Mortgage broker Bruce Patten, of Loan Market, said that even though it had only been a small move, it made a big difference to the market.
Where before there were a number of banks not lending to low-deposit borrowers at all, now all were open to those loans in some way.
‘‘A number of lenders were out of the over-80 per cent market and that put a damper on their ability to get other business. Now they are able to do that they are trying to be more competitive and regain market share. All banks are back in over 80 per cent and right back to 90 per cent.’’
Reserve Bank data shows there was $248 million of lending done to borrowers with deposits of less than 20 per cent in January this year, up from $209m in January last year.
He said banks were not offering preapprovals, but if buyers had signed a conditional offer, all had funds to offer.
ASB economist Jane Turner said the increase in competition in the home loan market was marked.
That could be due to the time of year, she said. Late summer and early autumn is a peak time for property sales. ‘‘Often, banks are mindful of making sure they have their share of the new lending.’’
Low rates look set to remain in place for the near future, at least. Predictions are that the next move in the official cash rate will be an increase – but that may not happen until next year.
ASB noted in its latest economic update that the difference between the average interest rates that banks charge each other for short-term unsecured loans and countries’ central bank rates has increased in the United States and Australia.
The bank’s economists said that, if it were to continue, it would have the same impact on banks as a central bank rate increase.