Banks already introducing tougher rules for property investors

Although the Reserve Bank is only consulting on introducing tougher lending rules of property investors, four lenders have already implemented the proposed changes. 

Westpac was first out of the blocks and it has been followed by ASB, Sovereign and SBS in introducing a maximum LVR of 60% for all new property investment loans.

ANZ chief executive David Hisco says in an opinion piece published in the NZ Herald that the central bank should "heavily increase LVR limits for property investors."

"The Reserve Bank wants most property investors around the country to have 40% deposits in future. We think they should go harder and ask for 60%. Almost half of house sales in Auckland are to property investors. Taking them out of the market will be unpopular amongst investors but it may end up doing them a favour.

"Of course this would mean less business for us banks but right now the solution calls for everyone to adjust."

Westpac says, in a communication to mortgage advisers, that it is making changes to its lending policy to ensure "we are positioned for the new restrictions, announced by the RBNZ on Tuesday." It says:

• All property investor applications will be at a maximum 60% LVR or higher if the combined security position includes an Owner-Occupied property.
• Owner Occupied policy will remain the same but a 10% nationwide speed limit will apply, rather than just 10% for Auckland and 15% elsewhere.
• There are no longer any regional distinctions between Auckland and the rest of New Zealand.

ASB has taken a similar position. ASB head of third party banking, Marc Oliver says, ASB will "no longer provide new approvals for lending >60% LVR solely secured by non-owner-occupied residential properties."

"We will consider applications that exceed 60% LVR where the customer is also providing owner-occupied residential property as security. This reflects the RBNZ’s “Combined Collateral Exemption” arrangements.

ASB will honour all existing pre-approvals above 60% and documented loans for non-owner-occupied property issued before July 21 until their expiry date. "To comply with the RBNZ changes, these are not to be rolled over at the end of their expiry date and customers should be advised of this."

SBS Bank has taken a similar position.

ANZ this has also made changes. They are:

• A maximum LVR of 85% applies for all owner-occupied home lending across NZ (previously 85% Auckland and 90% rest-of-NZ).
• A maximum LVR of 60% applies for residential investment lending across NZ (previously 70% in Auckland).

"We intend to honour all our existing pre-approvals, and any renewals will be subject to the new policy," ANZ says in a statement.

"While the Reserve Bank has announced it will be consulting on new LVR restrictions, we have made changes in the spirit of the RBNZ announcement.

We believe the changes are a sensible and responsible response to market conditions."