Credit Criteria Changes for overseas investors
In the past two days ANZ, Westpac and BNZ have changed their credit criteria for overseas investors. Will this make an impact on the rise of prices in NZ?
Some real estate agents think not, but time will tell.
In Auckland, many Chinese buyers needing finance use a Chinese Bank – HSBC has offices here and are probably rubbing their hands together. Many buyers may not need finance and won't be affected (of course I don't see these people so have no real idea how many there are).
BNZ’s changes announced today are quite significant though because their restrictions are tougher and it means ASB is very likely to follow suit. The smaller lenders may or may not - the perception of
financing overseas investors is becoming less palatable, although the official and more tangible explanation is they are riskier loans.
The main impact I see will be buyers who do not have NZ or Australian Citizenship or permanent NZ residency will have their pool of potential lenders restricted.
It will also affect New Zealander's who currently live overseas; their ability to buy a house here is getting harder. I've had a lot of clients in this situation – working overseas but wanting to buy in NZ before it gets too expensive, with the ultimate longer term goal of coming back to live in their home. The deposit needed won't really be an issue buying in Auckland, because you need 30% for investment anyway, but it could affect the regions. Also the income required to get an approval would be a lot more than what had been approved up until now. For example, BNZ had been accepting 90% of overseas income - say you earned $100K AUD they would have converted $90K AUD into NZD for the level of income. This will now be only 60% so $60K AUD converted to NZD.
This is not the same for every bank, and so it’s even more important to talk to a mortgage broker who can find the best bank to suit your needs.
Here’s a summary of the changes announced by each bank:
The policy updates summarised below are effective immediately for customers who use overseas income to service debt in New Zealand.
- A maximum LVR of 70% is applied;
- Facilities are restricted to owner occupied properties;
- Boarder income not permitted;
- No interest only lending will be available;
- ANZ Flexible Home Loan will not be available;
- Standard residential property only and will not be available for the purchase of bare land or construction;
- Lending is only available to individuals (no company or trust entities);
- Refinances are available however no additional lending is permitted;
- No cash contributions available;
- Customers must complete all Customer Due Diligence (CDD) and account opening processes in person at a New Zealand branch of ANZ prior to settlement (with original documentation);
- A New Zealand passport holder living abroad purchasing a property funded by overseas income is exempt from this overseas income policy and normal credit criteria apply.
Summary of the policy changes
- Westpac will no longer lend to non-resident borrowers with overseas income
- The maximum allowable LVR for NZ citizens and permanent residents with overseas income is 70% (from 85%)
- Borrowers on temporary resident visas will only be accepted if they have both a New Zealand address and NZ based income.
1. Foreign income of people who are not New Zealand or Australian citizens, or do not hold a current permanent residency visa won’t be recognised for servicing purposes. This is the case, regardless of whether or not they reside in New Zealand.
2. New Zealand and Australian citizens and permanent residency holders, who are not currently
residing in New Zealand using foreign income to service a loan will now have a maximum allowable LVR of 60%. Customers in this category will also have a 40% shade applied to the value of their income earned overseas, when calculating their ability to service the loan.