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The ASB bank has unilaterally imposed an immediate loan-to-value ratio on real estate investors, who will now need a 30 percent deposit.
Photo: RNZ / DOM THOMAS
The Reserve Bank (RBNZ) should start consulting with retail lenders on the recovery in loan-to-value ratios (LVRs) from early next year in response to the overheating of the housing market.
LVRs were suspended at the beginning of the Covid-19 outbreak to help support the economy.
ASB CEO Vittoria Shortt said the real estate market had not been affected by Covid-19 as many feared and that the bank was seeing record mortgage applications, which jumped 70 percent a year ago.
“If this surge in investor demand continues, it could lead the country down a potentially unsustainable path.”
“ASB believes that a balanced and sustainable housing market is in the best interest of all New Zealanders … it is about helping Kiwis build their financial future during exceptionally challenging times, so we are choosing to take this step now,” Shortt said.
All real estate investors would now need a 30 percent deposit for a loan from the current 20 percent requirement.
First-time home buyers are not affected by the new policy.
“For us, it’s about being a prudent and responsible lender. We all have to do our part and we are confident that Kiwis looking to buy their first home will welcome this move,” said Shortt.
The RBNZ’s various moves to lower wholesale interest rates and pump billions of dollars into the economy through banks have been held in part responsible for a spike in home prices in recent months.
It comes after Prime Minister Jacinda Ardern said today that house prices could not continue to rise at the rate they have.
Economists had warned that resetting the LVR and credit tightening would help stabilize the housing market.
Home prices have risen 19.8 percent year-on-year with the median now at $ 725,000.
Median home prices in Auckland hit the $ 1 million mark for the first time, up from $ 860,000 in October 2019.
Yesterday, the Reserve Bank announced its Loan Financing Program (FLP) for banks with very low interest rates, while keeping the official cash rate (OCR) at an all-time low of 0.25 percent.
The committee also said it was still considering the possible use of negative OCR, as well as other stimulus measures such as the purchase of foreign assets.
