Banks change pre-approvals
AN ANNOYED Westpac customer claims the bank gave him an unacceptable offer on his home loan pre-approval, knowing he would have no choice but to cancel it.
Yesterday the bank denied it was following ASB’s lead by withdrawing pre-approvals for some low-equity mortgages.
Westpac media relations manager Chris Mirams confirmed the bank had contacted a number of customers, but only to ensure they were up to speed with interest rate changes and new lending criteria.
‘‘Over a third of customers we have contacted have voluntarily withdrawn the application,’’ he said.
Earlier this month ASB cancelled all pre-approvals with a loan-to-value ratio (LVR) of more than 80 per cent, a move it said was forced by the Reserve Bank’s new lending restrictions.
Mirams stressed the bank had only called to make sure borrowers were still comfortable they could service the loan.
But one customer, who had preapprovals with both ASB and Westpac, said he had essentially been given no choice.
‘‘ASB did the honourable thing and spoke to applicants and stated publicly what it was doing,’’ he said. ‘‘Westpac said and did nothing.’’
When the man, who didn’t want to be named, went to arrange finance, the actual offer he received was significantly worse than the pre-approval.
‘‘So they wasted eight hours of our time and handed us an offer, knowing that the only sensible step was to turn it down,’’ he said.
Wellington mortgage broker Simon Rule said Westpac had been in touch last Friday, advising that high-LVR customers with sixmonth pre-approvals would only have 60 days to use them from next week.
‘‘They are essentially cancelling pre-approvals by shortening the term which they promised to clients,’’ he said.
Rule said it was ‘‘unprecedented’’ to change or cancel a borrower’s pre-approval.
‘‘That’s the whole reason you go to a bank for a pre-approval – to have that certainty.’’
However, he did not believe Westpac or ASB were to blame, and said there was no doubt in his mind that the other banks would eventually follow suit.
Westpac has promised to work with customers who have had ‘‘a change of circumstances’’ to see what options were available to get them across the line.
Those included the Welcome Home Loan scheme, KiwiSaver subsidies and withdrawals and the bank’s guarantor-style Family Springboard product.
The new lending restrictions, which came into force this month, prevent banks from lending more than 10 per cent of their new loans to borrowers with deposits of less than 20 per cent.
The Reserve Bank had to give the industry six months to implement the new rules.