Bank changes to restrict foreign buyers
One of the biggest changes in the market in recent months has been the decision by the big four banks to shut their doors on mortgage-seeking foreign buyers. Last month Westpac, ANZ, BNZ and ASB announced a series of changes to restrict residential mortgages to foreign residents using offshore income in their mortgage applications.
Westpac and ANZ both announced they would stop issuing home loans to foreign buyers while BNZ also introduced tough new restrictions on Kiwi borrowers living overseas.
BNZ said a maximum allowable loan to value ratio (LVR) of 60 per cent would be required of New Zealand and Australian citizens and permanent residency holders who did not reside in New Zealand, and use foreign income to service a loan.
Westpac reduced the maximum allowable LVR from 85 to 70 per cent and ANZ's home loan restrictions to foreign buyers also includes a maximum LVR requirement of 70 per cent.
But in May data collected by Land Information New Zealand showed just 3 per cent of homes were sold to overseas residents in the first three months of 2016.
So why the big reaction? The loan restrictions follow similar moves in Australia where the four big banks are taking measures to reduce risky lending. ANZ, Westpac, Commonwealth Bank and NAB in Australia moved to curb foreign lending this year after a spike in suspicious applications from overseas homebuyers. The suspicious applications included missing passport pages, salaries paid by tenuous offshore companies, and badly translated supporting loan documents.
The banks are seeking to reduce their exposure to risk related to overseas income – it’s thought that people using overseas income to service their loans are more likely to walk away from their loans in the event of a market crash.