‘Banks loosening lending criteria’
Banks are easing their lending restrictions, but the pace is glacial, mortgage brokers say.
Independent economist Tony Alexander’s latest survey of mortgage brokers showed a dwindling proportion who said banks were loosening their lending criteria for borrowers. “The general tone has been positive, but it’s been bit by glacial bit.”
He said a net 24% of brokers who answered his survey said banks were loosening their lending criteria, down from over 40% a month ago. It was a small sample, however, with just 54 mortgage advisers answering Alexander’s survey.
It’s been tough for brokers with high home loan rates dampening the volume of house sales, and a glut of homes on the market, real estate data released in recent weeks showed.
Reserve Bank Te Pūtea Matua data showed that in January, banks issued $3.4 billion in new home lending, up from $2.7b in January last year but still well down on the $4.7b in January 2022.
In its February Monetary Policy Statement, the Reserve Bank said lending growth remained subdued.
Alexander said banks were open for business, but were in no hurry to rush money out the door. They were preferring to maintain their margins, which he believed was in part the result of them not wanting to be seen to be undermining Reserve Bank efforts to bring down inflation.
“They have larger than average margins. There’s scope for banks to cut their mortgage rates,” he said. What cuts they have made had been small, he said.
Alexander said brokers said banks were now showing more flexibility on uncommitted monthly income criteria. This included now being open to including income from taking in boarders.
They had also reported a slight relaxation of the rules for high loan to value ratio borrowers.
Banks had been limiting their lending to people with less than 20% deposits to their existing customers, not those who did their banking with other banks, but now, brokers said all banks were willing to do low deposit home loans for people who were not currently their customers.
Brokers said banks were softening towards first home buyers, and seemed to want to assist them to get into homes.
Brokers continued to report a rise in inquiries by cash-strapped homeowners seeking to refinance their current loans.
Brokers also claimed they were seeing more inquiries from investors seeking to buy homes, but the property market remained weak, Alexander said.
“A month doesn’t go by without a new reason for buyers to pull back,” he said.