Banks say inquiry levels for those wanting to borrow money to
buy a home have plummeted since the Reserve Bank's clampdown
on low-deposit lending, leaving them scurrying to remind the
public they are still open for business.
On October 1 the Reserve Bank introduced a 10 per cent cap
for all new lending to those with a deposit of less than 20
The banks must meet the requirements or face losing their
licence to operate.
Figures released by the Reserve Bank show the percentage of
new lending where the borrower has equity of less than 20 per
cent has fallen from 26.5 per cent in September to 12.8 per
cent in October.
Excluding exemptions, such as Housing New Zealand's Welcome
Home Loans scheme, the lending fell to 11.7 per cent.
Shaun Drylie, ASB's general manager of product and strategy,
said approvals had effectively halved but inquiry levels were
down even more.
"Initially there was a spike up in activity as people rushed
to get in ahead of the change. Now if we look at it, a lot of
the people coming in to ask have dropped away."
Drylie said there appeared to be a belief that the banks were
not doing any lending to those with a deposit of less than 20
"People are seeing it as quite a binary thing - it's either
on or off.
"I think demand has got to the stage where they aren't asking
and maybe they should."
Fred Ohlsson, ANZ managing director retail and business
banking, also said demand had fallen away.
"With the amount of media attention in the last three to six
months the demand for greater than 80 per cent loans is
"People are just not asking the question whereas previously
they all would have asked."
Bruce Thompson, head of communications at Kiwibank, said
there was a perception among first-home buyers that there was
no point in even asking if they could get a mortgage.
"One of the things is the perception - don't even try because
they will say no. We are saying, 'Do try - the door is still
Thompson said Kiwibank was giving first-home buyers priority
over people looking for an investment property or trying to
top up their loan.
The bank had some flexibility because it offered Welcome Home
Loans, which were excluded from the low equity quota.
Borrowers need have only a 10 per cent deposit for such a
loan but must meet house price and earning caps.
Westpac head of retail Ian Blair said the bank had to assume
the new low deposit rules were a permanent fixture.
"That is the assumption we have got to make. But it won't
surprise me if the requirements evolve."
- Tamsyn Parker of the New Zealand Herald