Banks ease mort­gage re­stric­tions

South Waikato News - - PROPERTY -

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.

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