Tough servicing rates could be eased

Earlier this month APRA removed its "serviceability buffer", which forced Aussie lenders to assess loans at a minimum interest rate of 7%. 

Australian banks have begun to act. Westpac and ANZ have cut serviceability rates in Australia from 7% to about 5.5%-5.7% since the APRA move.

The development has sparked speculation New Zealand banks could also lower serviceability tests. Another fall in the Official Cash Rate could also prompt a rethink.

New Zealand advisers have become frustrated by tough servicing tests enforced by the Australian-owned big four. While the Reserve Bank of New Zealand has no rules on serviceability, advisers believe the big four have been influenced by APRA's old guidelines.

Tony Alexander, chief economist at BNZ, believes the Australian developments could be a knock-on effect for New Zealand lenders.

"When there are changes in Australia, similar things happen in New Zealand. People are running into debt servicing issues at rates of about 8%, at a time when rates are continuing to fall, and could all further," Alexander said. "I wouldn't be surprised to see eventual changes here."

Alexander says serviceability changes could see "more people become eligible for financing" and could help to balance out headwinds to house price growth, such as reduced migration and ringfencing. 

Advisers are optimistic the serviceability changes will be echoed here. 

Stephen Wilton of The Advice Group, said he was "hopeful" and "expecting".

Wilton added: "We even have clients who are aware of it and we have a long list of deals waiting to be re-looked at."

Kris Pedersen, managing director of Kris Pedersen Mortgages, believes it is "hard to say" whether the APRA rule change will impact New Zealand.  Pedersen said domestic banks, and not just Aussie-owned lenders, had enforced tough servicing tests in recent years.

Pedersen added some customers would still face difficulties passing the banks' hurdles for a home loan.

"If they do [cut serviceability rates], it is mainly going to benefit larger investors when comparing things to a year or so back. For home owners or smaller investors the increase in living expenses will offset much of the benefit of the lower qualifying rate," Pedersen added.