The real situation is the Reserve Bank is concerned with quickly increasing House Prices in Auckland and Christchurch and how it could effect our countries stability and effect people lives (should these prices reduce quickly). Borrowers could quickly be in the position where they owe more than their property is worth.
To avoid this position the Reserve Bank has imposed regulation on the Bank’s restricting them with high Lending Value Ratio’s (LVR’s). All banks have to comply with these new requirements and failure to comply could result in them failing to meet their conditions of registration (being registered as a bank).
So what does all this mean ??. All new home loan borrowing is measured by the Reserve Bank and the new lending figures published monthly by the Bank. The restriction placed on the bank’s means that the over 80% lending on residential property is only allowed to make up 10% of their total new lending flows.
As an example ;
Monthly New Lending flows $ 300.0 million
Bank A achieves $ 60.0 million of this new lending
For Bank A this means only $ 6.0 million of this lending can be above 80%.
What this means to borrowers is, it’s a bit of a lottery when you are borrowing more than 80% if you will be approved a loan from your existing bank. Some bank’s are saving above 80% lending for their existing customers, although some are open. You could be their best customer but if your timing is wrong and their book is full, you could miss out on getting into your dream home.
My advice is to talk to a broker who will have access to multiple providers and funding sources.
