Banks ease mortgage restrictions
Banks are loosening the purse strings for mortgages at the same time that the Reserve Bank withdraws the last emergency funding facility put in place during the global financial crisis.
Mortgage brokers and real estate agents say most banks are again lending up to 95 per cent of a property’s value for people on high incomes.
Mortgage broker Jeff Royle said the banks were reacting to the market as houses were put up for sale.
‘‘Most are increasing their LVRs (loan to value ratio) up to 95 per cent for strong income earners,’’ Mr Royle said.
ASB lending general manager Mike Davy said the improving economy meant most banks had reviewed their lending criteria for customers with less than 20 per cent deposit.
First home buyers usually needed at least a 10 per cent deposit, Mr Davy said.
At the height of the financial crisis and recession, banks restricted nearly all lending to a maximum of 80 per cent of a property’s value.
During the property boom it was possible to get a loan with no deposit.
Westpac chief executive George Frazis said the bank was lending at up to 90 per cent of a property’s value but had not eased its lending requirements. However, a small number of existing loans were being refinanced at higher than 90 per cent value of a property.
This was being done to reduce the repayments for some customers, who had struck financial difficulty during the recession to help them stay in their homes Mr Frazis said.
All new loans were being sold at below 90 per cent of the property’s value, he said.
The Reserve Bank said it would remove the last remaining temporary liquidity facility put in place during the financial crisis as banks were able to access funding through normal money markets.
The Reserve Bank introduced temporary emergency funding measures for banks in 2008 but began
withdrawing them from October last year.
The last emergency measure to be removed was the Tuesday Open Market Operation which allowed banks to borrow from the Reserve Bank for terms up to three months to maintain liquidity after global money markets froze during the financial crisis.
The facility will be withdrawn from December 1.
Reserve Bank deputy governor Grant Spencer said financial market conditions were continuing to stabilise and banks were making little use of the special facilities.
During the next few months the Reserve Bank would review the remaining supporting measures introduced during the crisis, Mr Spencer said.