Mortgage loan

You have to admire Labour for fixing another crisis

We don’t really need Labour in government they are doing just fine in opposition fixing every crisis they declare.

BNZ has become the latest bank to stop lending to foreign property investors who earn their money overseas.

The bank says it won’t recognise foreign income of people who are not New Zealand or Australian citizens, even if they reside in New Zealand.

The bank is also cracking down on New Zealanders and Australians living overseas and trying to pay a mortgage in New Zealand. They will now only be able to  borrow  60 percent of the value of a property.

And the bank has got even tougher, saying it will not take into account all of the income earned overseas. This means if a customer is a New Zealand or Australian citizen who is living and earning income overseas, only 60 percent of that income will be taken into account when considering whether they can service a new home loan.

BNZ’s decision follows two of the country’s biggest banks which have tightened up their rules for lending to property investors.

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No need for government action, the market has solved it

All too often people expect the government to solve problems, if there even is a problem.

Generally they are useless at doing anything of the sort, except if it comes to collecting taxes.

People have been clamouring for the government to DO something about foreign buyers of real estate.

Today the market solved the problem for them….if it actually is a problem. I’ve never ever heard of a bank turning away profitable business. I suspect there is not problem at all which means the banks can safely decide not to do it.

Westpac and ANZ will no longer lend to overseas-based buyers of New Zealand property – with other banks expected to follow the move to shut the door on foreign investors.

The restrictions follow moves by Australian banks to stop lending to foreign buyers of property.

Westpac New Zealand has announced that from today it will no longer lend to non-resident borrowers with overseas income.

Borrowers on temporary resident visas will only be accepted if they have both a New Zealand address and a New Zealand-based income.

ANZ has also announced restrictions that will effectively shut out most non-resident, overseas-based borrowers, including restricting lending to owner-occupied properties.

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Are Debt-to-income restrictions on mortgages vote winners? Of course they’re not

Are Debt-to-income restrictions on mortgages vote winners?

Of course they’re not, and what’s the bet Farrar has been polling and focus grouping this.

Debt-to-income restrictions on mortgages are a long way off, even if the Reserve Bank decides it wants to introduce them, Parliament has been told.

Finance Minister Bill English was questioned about the restrictions today, after confirming last week that the Government and the Reserve Bank were discussing them.

“The Reserve Bank has yet to investigate whether the tool is workable, then it’s got to decide whether it wants to include it in the memorandum of understanding [with the Government], then it has to go out and consult everybody and work out how to apply it,” Mr English said.

Labour’s finance spokesman, Grant Robertson, asked Mr English about the potential impact of debt-to-income restrictions on first home buyers, but the minister said he wasn’t going to speculate on an issue the bank had just started working on.   Read more »

Death to the property industry predictable

Government and Reserve Bank talk about capping mortgages to salaries will be a death knell to the property industry.

So whoever came up with the idea to salary cap mortgages should be shot at dawn.

I’m totally surprised this idea has an traction at all. Firstly it’s more desperate than a dateless prom queen but secondly  it’s more dangerous than rising house prices.

A typical household would be blocked from getting a mortgage of more than $405,000 under income-related lending restrictions being considered by the Reserve Bank.

As house prices begin to rise again, the Government is refusing to rule out debt-to-income limits as a potential response to cool the housing market and prevent “a bubble emerging”.

If adopted, the policy would stop people from borrowing too much relative to their income. It is already used in the United Kingdom, where most buyers cannot get a mortgage higher than 4.5 times their annual earnings. But opponents say any such policy would hit first-home buyers hardest, making it even harder for them to attain home ownership.

Debt-to-income limits were raised by the Reserve Bank yesterday after it warned the Government that resurgent house prices were a risk to the economy. Governor Graeme Wheeler said the average house price in Auckland was nine times larger than the average income, making it one of the least affordable metropolitan markets in the developed world.

The bank has raised the idea before, but said yesterday that it was now “seriously considering” the measure.

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Can’t wait for Twyford to decry this good news

Mortgage interest rates are now the lowest they have been for 60 years.

No doubt Phil Twyford will tell us this is awful and Labour will be moving to raise those interest rates.

Mortgage rates have hit a 60-year low as banks vie to undercut each other.

BNZ today shaved 30 basis points off its two-year fixed rate, down to 4.69 per cent.

Statistics New Zealand data shows commercial banks’ mortgage rates have not been so low since 1955.

BNZ’s move follows the Reserve Bank’s cut to the official cash rate by 25 basis points to 3 per cent last Thursday.

BNZ’s new rate undercuts SBS Bank’s 4.85 per cent 18 month rate.

Interest.co.nz said the rate was available to BNZ customers who had at least 20 per cent equity in their property and who had a BNZ account receiving salary or wages.

Massey University banking expert David Tripe said BNZ’s new rate was “probably somewhere near where rates ought to be”.    Read more »

Reserve Bank told off for micromanaging mortgage market – and failing

The Reserve Bank copped a kicking from treasury for their failed meddling in the mortgage market.

Not only was it unnecessary it also failed.

The Reserve Bank has been told to stick to its knitting by the Treasury, with officials warning that rules on mortgage borrowing need to be within its mandate.

In documents released on Thursday evening, Treasury officials also warned that the original loan to value restrictions put in place by the Reserve Bank may have led to more activity by property investors. It follows numerous claims that the rules have hurt first time buyers.

In a briefing for Secretary to the Treasury Gabriel Makhlouf, officials said they agreed with the Reserve Bank that a pick-up on the Auckland housing market “could potentially pose a threat to financial stability” in the coming years.

“However, Treasury has been engaging with the RBNZ to suggest that although we accept that house price changes can have macroeconomic implications, the RBNZ’s mandate is focused on promoting financial stability, and therefore the policy proposals should be reframed to focus more clearly on reducing systemic risk rather than asset prices.”

The comments appear to suggest the Reserve Bank is being warned that it may be overstepping its role over financial stability, a claim made in recent months by Michael Reddell, a senior adviser to the bank who was made redundant earlier this year.   Read more »

The end of low equity mortgages

The ASB Bank has announced the end of their low equity mortgages.

ASB Bank has cancelled all pre-approvals for home loans over the 80 per cent loan to value ratio with effect from October 4.

A spokesman for the bank said it had been telling customers and mortgages brokers about the change over the last few days.

The change comes ahead of the Reserve Bank’s crack down on low equity or low deposit lending. From October 1 banks must cap new lending above the 80 per cent threshold to 10 per cent or face losing their license.

Shaun Drylie, general manager, product and strategy at the ASB Bank said the change was being implemented to comply with the new lending restrictions.

“ASB, like all New Zealand banks, has to comply with these restrictions under our conditions of registration.”  Read more »

That crazy Bernard Hickey

Wow, what a guy.

Fresh from telling anyone who’ll listen that NZ’s biggest problem is its addiction to property, Bernard Hickey is now telling punters to get in quick to borrow against their home.

It seems that Esteemed Bill English (or Wiremu Pakeha as he is known as in Tuhoe) and the Reserve Bank is soliciting feedback on Loan value ratios, or LVRs.

This means that banks may not be able to loan more than a certain amount on a home, maybe 80%. (You will remember in the property boom 5-10 years ago, you could get 105%, because you needed a plasma TV to go with your Grey Lynn villa).  Read more »