ANZ tightens investor servicing

ANZ has tightened its affordability criteria for investor lending and will only count 65% of rental income when assessing new mortgages, marking the first major change from a big four bank since the Government's housing reforms.

TMM Online can reveal that ANZ will only count 65% of rental income, down from 75%.

The bank has informed advisers of the new rules, which come into effect on May 13.

The decision to recalculate rental property income is directly related to the Government's tax deductibility changes. Under the recent reforms, investors will no longer be able to offset interest against their rental income. 

While the tax deductibility changes will be gradually introduced, ANZ has taken a decision to act immediately. 

ANZ's new rule effectively reflects that investors will be 10% worse off under the new reforms, as investors brace for a financial hit under the new regime. 

The revised servicing calculations are likely to have a major impact on investors' ability to borrow, with other big four lenders and rivals expected to follow suit and impose new serviceability rules.

One adviser said the changes would "make it much harder for people who want to be landlords". 

"While ANZ is the first bank to do this, they are usually at the forefront with these changes, and I wouldn't be surprised to see the other banks follow," the adviser said. 

New builds will be exempt from the servicing calculator changes. The bank will continue to count 75% of rental income on new properties, according to advisers.

An ANZ spokesman confirmed the changes in a statement.

"In late March, the NZ Government announced a number of housing policy changes as a means of reducing the heat in the NZ housing market along with supporting first home buyers.

"One of these policy changes was to remove the ability for property investors to offset their interest expenses against their rental income when calculating their tax obligations. Although this is to be phased in over a four-year period from October 1, 2021, we consider this change will have an impact on serviceability for many investors.

"As a responsible lender, ANZ has an obligation to appropriately reflect this within our lending assessment process for new residential investment lending. So from mid-May we will be decreasing the amount of rental income that we take into consideration within the assessment from 75% to 65% to initially reflect this policy change," the spokesman added.

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