Door opens for low-deposit homebuyers

Date 21 Feb 2022

ANZ and Kiwibank have started to lend home loans to people with smaller deposits.

In November, loan-to-value restrictions were tightened so that banks could lend no more than 10 per cent of their new loans to owner-occupier borrowers with a deposit of 20 per cent or less.

That led to many would-be buyers having their preapprovals cancelled, and new responsible lending rules introduced the following month made it tougher again for some to get home loans.

This week, ANZ has said it will resume lending to existing customers with a deposit of less than 20 per cent of the value of the home they want to buy, provided they have a budget surplus of $2500 each month.

Bruce Patten, a mortgage adviser with Loan Market, said that was a significant increase on the amount of “uncommitted monthly income” that had previously been required.

“You’d have to have a fairly decent income to meet the criteria.”

He said the intention seemed to be that any buyers would then be able to cope with increasing interest rates. The Reserve Bank is expected to increase the OCR again this week.

An ANZ spokeswoman said the pause on low-deposit lending had always been a temporary measure.

"To help us manage the number of applications and approvals, and ensure we continue to meet the tightened RBNZ requirements, we're opening up on over-80 per cent LVR lending in a considered way. To begin with, we're reintroducing for approvals only (customers who have found a property to make an offer on), not pre-approvals. And, we have a higher uncommitted monthly income requirement at the moment, so borrowers will need to meet a higher threshold to qualify. We often make changes to the uncommitted monthly income requirements in this way."

He said Kiwibank had also started to lend to existing customers with a smaller deposit, and did not require such a large budget surplus.

Patten said he hoped it would lead to all the banks getting back into the lower-deposit part of the market. Lenders tend to stay well below the 10 per cent allowance under the LVR rules to avoid breaking the rules.

There was $667 million of lending to people with deposit or equity of less than 20 per cent in December, down from $887m a year earlier.

“They’re all catering for existing customers only so at least one of the buyers has to be an existing customer with their salary being direct credited to an account. They look after their own customers first.”

Door opens for low-deposit homebuyers