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The Reserve Bank Governor has encouraged banks to be 'out there doing their business'. We check the pulse of the big five banks and see how they are responding

The Reserve Bank Governor has encouraged banks to be 'out there doing their business'. We check the pulse of the big five banks and see how they are responding

Reserve Bank Governor Adrian Orr has suggested that our banks need to be "courageous"  and "out there doing their business" in a Covid-19 world - and they need to be considering the long-term wellbeing of their customers.

And this week he said: "...Banks really have to be sharp on pricing, quick to market, make those decisions, because normal business - normal behaviour - can’t continue during these periods. They were well positioned going in - highly capitalised - they [the banks] need to be sharing the risk.”

The messages coming from the top are clear. The RBNZ wants the banks to keep lending, keep the money flowing, keep supporting their customers, in order to keep the wheels of the economy somewhat turning in the midst of this huge shock.

The help and encouragement that the RBNZ has given to the banks to achieve this end has included delaying implementation of a requirement for banks to hold more capital, allowing more leeway on how much of their funding has to come from saver deposits (IE considerably less) and this week a proposal to very soon remove the limits on bank high loan to value ratio (LVR) lending.

The relaxation of the rules around deposit funding (reducing the 'core funding ratios' from 75% to 50%) came in conjunction with the announcement that banks would be offering up to six-month mortgage payment deferrals.

Debt deferral

The banking industry body the New Zealand Bankers' Association has started compiling on a daily basis figures on deferrals. The most recent figures at the time of writing had $16.1 billion of banks' consumer debt (including mortgages, personal loans and credit card debt) on which there are currently reduced loan repayments, while there's $16.4 billion with all payment deferred. So, that's a grand total of $32.5 billion debt (involving nearly 92,000 customers) that's currently on either reduced payment or total deferment. 

The RBNZ's monthly sector lending figures as at the end of February showed $287.7 billion of housing and consumer debt outstanding. So, the $32.5 billion figure shows that well over 10% of mortgage and consumer debt outstanding in New Zealand is either being paid on a reduced basis - or not currently at all, which is quit a lot. 

The country's banks are now also offering a range of relief options to small business customers financially affected by the Covid-19 pandemic, including interest-only loan repayments or temporarily deferring all loan repayments in some cases.

It all goes to highlight the fact that the pressure is on. It's on the people and on the businesses. And this pressure is going back on the banks.

At interest.co.nz we were interested in trying to get the pulse of some of the banks and so approached the big five (ANZ, ASB, BNZ, Kiwibank and Westpac) with some questions about the approach they are taking to lending and managing customers' needs.

The responses

Courageous? Well, based on the answers, I wouldn't describe the behaviour as particularly that so far. It's early days yet, but cautious and measured seems to be how the banks are going about things so far. And I guess we wouldn't really expect any different. These are very strange times.

I'll be honest too and say we asked the questions of the banks with a eye on whether policies at the banks have been reviewed and whether lending criteria have been tightened - particularly for a vulnerable (because of their generally low house buying deposits) demographic such as the first home buyers.

We asked the banks these questions:

  1. How is Covid-19 affecting your lending policies?
  2. What is the biggest challenge you think you will face with your lending policies in coming months?
  3. Are you applying tighter lending criteria than before the virus outbreak?
  4. Will you be taking a more conservative approach to lending to would-be first home buyers?
  5. Do you have any concerns that existing mortgages may go into negative equity?
  6. In terms of your overall lending, do you intend to give business lending a bigger priority at the moment over mortgage lending?

The full text of what the five banks responded to us with is available here. We haven't changed any of the text. 

Without wanting to over-generalise from among the range of response, there were some points made by a few of the banks that can be summarised.

Generally the banks have stopped short of saying lending policies have been tightened - but they do stress that the policies are regularly reviewed.

They are not expressing undue concern that customers might go into negative equity - though say the current uncertainty does highlight the importance of having a good deposit.

There are some signs among the banks of considerably increased scrutiny of the income sources of loan applicants - which could only be expected with job stability now a real issue for the immediate future.

In regard to whether business lending or personal/mortgage lending is getting precedence at the moment, the banks are generally indicating they have a balanced approach to both.

What the banks said

In terms of some specific answers, I was interested in the response of the country's biggest bank, ANZ to the question around the biggest challenge facing them with lending in coming months. 

I guess you may have inferred from my comments earlier in this article about loan deferments that I'm a bit surprised/concerned by the high number of them at what may yet be a fairly early stage.

ANZ said this: "Covid-19 restrictions have meant many people have less money coming in than usual. If they’re a home-owner, they might be concerned about how they will pay their home loan until things return to normal.

"Recently, there has been a lot of publicity about home loan deferrals - but there are other options, often with lower impacts, to help customers stay on top of their mortgage including interest-only repayments or extending the life of their loan."

In answering that same question, ASB said their lending criteria continued to take into account a range of factors when assessing an application for a home loan.

"One of the most important factors we consider is the borrower’s ability to afford their repayments, in line with our responsible lending obligations.

"This remains true in the current situation, and we are working with customers on a case-by-case basis. To date we have assisted 22,000 customers with Covid relief. This equates to $8.5 billion (14%) of ASB’s home lending."

In terms of the general approach to lending, BNZ volunteers the view that the "balance between flexibility, pragmatism and speed is perhaps the most significant difference in how we are lending now verses our approach prior to Covid-19".

In response to the question on whether they would take a more conservative approach to lending to would-be first home buyers, Kiwibank said was "open for business for our customers including first home buyers".

Income uncertainty

"Customers may have more uncertainty on their income at this time and we want to ensure that they are well placed to afford their lending. It is important that customers are also aware of potential price volatility in this market and how that can impact their equity."

Westpac says as a general comment: "We’ll continue to meet the needs of all customers without bias to any type of lending.  The vast majority of our borrowers’ equity positions are strong, and we expect that to remain the case."

Over the coming months we will keep a close watch on the various lending figures to see just how the actions of the banks and their customers do pan out. 

*This article was first published in our email for paying subscribers. See here for more details and how to subscribe.

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62 Comments

A good survey and article David.
Clearly banks are going to be diplomatic and somewhat reserved in their response - a lot of political speak there but comments seem reasonable.
As for personal lending, the consistent comment seemed to be security of income - clearly more concerned about job risk so FHB in the likes of the public service would seem better placed than those in a SME (and especially the likes of tourism and hospitality) who will be disadvantaged.
There did not seem alarm about negative equity for existing mortgages. For recent lending, clearly LVRs have given some buffer and and I expect that as long as one can service their mortgage banks will be happy - a rush of mortgagee sales and a collapse of the property market is not in their interest.

"a rush of mortgagee sales and a collapse of the property market is not in their interest."
Quite right.
But that hasn't stopped it happening before....
One might want to add 'global property' to 'global stocks' in this graph as an asset supported by artificial means. Can they defy gravity? Time will tell.
https://www.macrobusiness.com.au/wp-content/uploads/2020/04/bfmEE50.jpg

bw
"But that hasn't stopped it happening before...."
Where and when are you referring to?
If you are referring to the US and the GFC, then there was a very high incidence of sub-prime mortgages which is widely recognised as following a period of extremely irresponsible risky lending. That is currently not the case in NZ with LVRs having been in place.
However, I accept that nothing is certain but neither should one be scaremongering.
I don't expect any empathy for boomers, but in the 1980s there was a shock when within a year mortgage interest rates went from around 10% up to 25%. As interest accounts for a large part of mortgage payments for much of the early part of the term, for many mortgage payments more than doubled. For me, just having upgraded my home and was on one income with young family it was very tight; however, it was surprisingly how one adjusted discretionary spending. I also don't recall widespread mortgagee sales in what was probably the most significant period over the past 50 year of risk to those with mortgages.
Your graph linking property to the share market over a very short term is not particularly relevant and does border on scaremongering. Firstly, the share market tends to be far more volatile than property (e.g. NZ shares and property in 1987 and GFC), I don't think including NZ as typical of the global scale is relevant (e.g. our incidence of the virus is quite different and our our economy is in a better position compared to most countries), and your graph conveniently excludes the period of recent bounce back (and yes, personally I accept that it is likely a dead cat bounce).
I agree with you, time will tell. There will certainly be economic pain for many and I wish them well.
Clearly the NZ Government is committed to economic stability and fortunately our level of debt and the nature of our economy (excluding tourism) is probably well placed to recover more so than most other countries.
There is enough to be concerned about individually but care needs to be taken to avoid widespread scaremongering.

"but neither should one be scaremongering."

"Scaremongering" - that emotive label is used by the people who want to dismiss reality, and avoid the uncomfortable situation of what could possibly lie ahead.
Is warning about the potential risks of COVID19 also "scaremongering"? (Look at the results in Italy, US, UK, Spain, etc)
Is warning about the potential risks of an eruption on White Island also "scaremongering"?
Is warning about the potential risks of an tsunami hitting the east coast on NZ also "scaremongering"

The potential risks are very real, and avoiding the discussion does not make it go away. Avoiding the unpleasant conversation leaves people potentially uninformed and unprepared.

A number of commenters are being realists about the potential risks on the economy. Kenneth Rogoff has said this is one of the worst economic environments in 150 years. There should be an open and honest discussion about the risks here.

So people want to avoid discussing the bad stuff, yet it is perfectly acceptable to be cheerleading the economy and future outlook?
- Property prices double every 10 years
- Rockstar economy?

Is that not a double standard to only talk about the good stuff?

The reason that households took on too much debt is due to their blind optimism, yet overlooking the reality of the financial vulnerability of households, and being caught out by a potential unexpected shock. People who were warning about these potential risks were labelled fear mongers, scare mongers, DGM. Well, those risks have now become an increasing possibility. Look at the potential effects on Queenstown.

Some people chose to dismiss or ignore the risk warnings made by commenters on interest.co.nz on house price risks. Those people then chose to purchase a house with high levels of debt, now they bear both the potential risks and potential rewards of that decision.

People may want to talk only about the positives, and ignore the reality of potential downside risks. That is entirely their choice.

People are free to choose to ignore the risks, but that doesn't make them go away. People are free to choose to ignore the risk warnings, yet people are not free to choose the consequences of their choice.

If you look at some possibilities through the lens of irrationality, it looks like doom and gloom. Generally I've found those who see it as doom and gloom as opposed to a realistic possibility/probability have recency and confirmation bias issues they need to address.

CN
I have no problem with one being realistic and concerned; that is being prudent.
I see extreme unsubstantiated comments on this site which are scaremongering - Independent Observer and Foreign Buyer calling a 50% and more fall in property prices is scaremongering.

What's scary about a 50% fall in property prices? What real purpose does a sustained "property value" have in the economy? As a country do we manufacture and export "properties"? Surely a 50% fall in house prices would translate forward into a 50% (or greater) reduction in private mortgage debt for future market participants, what's wrong with that?

If i said "I predict Petrol prices are going to fall by up to 50% this year" would that too be scaremongering? A 50% fall in Milk prices? Logs?

"I don't expect any empathy for boomers, but in the 1980s there was a shock when within a year mortgage interest rates went from around 10% up to 25%. " Some facts from the RBNZ
https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-mortgage-rates
Archived key graph data (XLSX 195.94 KB).
The small issue of inflation
https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-inflation
Archived key graph data (XLSX 195.94 KB).
When 'boomers' talk of how hard it was in the 1980s, and quote erroneous facts to support their position .

Didn't they take out 2nd, 3rd, 4th and 5th mortgages at interest rates much higher than the prevailing rates. But don't forget the wage freeze Muldoon brought in, terrible times huh. Wages going up so fast that politicians needed to step in. Mortgage balances weren't going up with inflation.

Cowpat
.Careful. You need to retract your slur that I have used erroneous information.
I can assure you that mortgage rates did reach 25% and even conservative lenders such as POSB were at 21% on first mortgage; I still have the bank's letter.
You will note that RBNZ records 20.8% - but you need to appreciate that was an average rate. Mortgages were on floating rates (hence no data for 2 year rates) and different lenders moved at different times often playing catch-up; one would get a letter every six months or so advising of new rate and that could push the rate up beyond the average 20%.
Not erroneous at all - maybe you should look carefully at the data, understand the mortgage environment was quite different to that today with terms, that second and third mortgages were common. You comment is quite naive. Talk with a few boomers - your parents may even recall it.
And don't think that wages kept pace with high inflation - it was common that government employment agreements were for a period of three years, negotiations couldn't be started until after expiry date and then protracted industrial action. Wage settlements of double digits and back dated a year or more were not uncommon reflecting a cash flow issue while mortgage rates increased.

How can a possibility be called scaremongering! Unless you're in denial towards a given outcome. Hence why I think you have recency and confirmation bias issues that you may need to think about.

House prices could rise...but if someone was to say that I wouldn't say that it is scaremongering! Its just another possibility. And you need to give each possibility a weighted probability based upon past events of a similar nature. So I look to other markets that have had similar levels of debt/house price inflation - and they outcome has been 50% falls (or more). Its a possibility that this will happen. By no means am I saying its a probably.

Who would have thought the USA would have 20% unemployment right now? If I asked you that question at the start of the year you would have perhaps denied that and said I'm scaremongering. Well here we are. So sure you want to dismiss a 50% fall in house prices?

Here's a quick look back in time...and events appear to be unfolding in terms of the worst case scenario:

https://www.newsroom.co.nz/2017/05/08/25357/kiwis-private-debts-put-the-...

IO
Not a problem. Your claim was an unqualified and specific 50% plus drop.
Will be interesting to see how credible you are. Time will tell.
However you seem to be trying to back track already.

Haha you're making stuff up now. I'm not saying its going to happen! I'm saying its a possiblity! (please recognise the difference between possible/probably/certain!) How can my 'credibility' be judged based upon saying there is a possible outcome? If I were to say were are certainly going to have a 50% drop in house prices - please yes hold me to my word, but I'm not saying that.

And IF (that's an if, I'm not saying its going to!) it does fall by 50% - where does that leave you given that you appear to be in denial to that possible outcome? Could I make judgement of your credibility? Or do you alone have the right to make judgement of others but to not be judged yourself? And if that is the case I'm calling you out for hypocrisy.

IO
Not making it u; a couple of other occasions you have asserted the same thing.. :)
by Independent_Observer | 22nd Mar 20, 11:01am
I've been saying this on here for about 5 years now. Our property market could well be the mother of all bubbles. It wouldn't surprised me to see a 50% (or more) fall in property prices across NZ.

Have a good weekend - and meant sincerely.

"Wouldn't surprise me to see a 50% fall in property prices" is not really an assertion.

Some people have experienced a 50% price drop firsthand. Independent Observer was in the US during the GFC I believe. Personally have witnessed it in Asia during the Asian Financial Crisis in 1998-2003. Others who were in Ireland experienced firsthand it also.

It is hard to imagine something that one has not experienced firsthand. Some recent examples -
1) how many people could have imagined that the oil price could ever reach NEGATIVE US$37?,
2) in late January, who could have imagined that the global economy would be effectively shut down by a pandemic and that people would have to stay in their own homes for 4 weeks? Yet here we all are.

Heard of a story of apartments which experienced, an incredible 75% fall in price during the GFC in NZ.

There is a potentially huge imbalance between effective supply and effective demand in certain geographical and segmental markets in NZ. This is despite the underlying housing shortage as the public is frequently reminded by property market promoters.

A 50% fall in property prices in certain geographical and segmental markets is not a zero probability event in my judgement. For example in Auckland, the currently median house price to household income is approximately 9-10x. A median house price to income could fall to 5x (and then there is median household incomes falling due to unemployment, fewer hours worked, and salary cuts, etc)

The longer the economy is disrupted (or an extremely slow economic recovery), the more businesses are unable to survive, and the more people become unemployed, then this increases the probability of larger price falls. The offsetting factor is government fiscal and monetary policy measures. Regardless of how low interest rates go, if highly leveraged households are unable to meet debt service payments after the mortgage payment deferment period expires, then some highly leveraged households may be forced to act.

Yes watched it first hand in the US and had acquaintances in Dublin who saw around 60% drop in prices. Watched what happens when people are in negative equity, companies aren't employing, projects are going bad. The stress of it all even resulted in death (a guy had stress related heart attack and died in the work place...). So to watch what we've done in NZ the last 10 years wrt to property and lending has been very painful to witness as I knew the potential outcome/s if it goes bad.

So I'm not just throwing around a 50% drop to scare people. I honestly think it could happen. And in my view its much better to realistically face, talk about and plan for possibilities - as opposed to just dismiss them as scaremongering (unless of course your attitudes are similar to the captain of the Titanic and are happy to deal with the results?) And if you look at the level of real inflation we have in house prices, our bubble is significantly larger than what the US had in 2008 and probably Ireland. There's no reason why house prices couldn't fall 70%. Look at our private debt/gdp ratio the last 20 years or so. Its insane. If interest rates ever rise as a result of run away inflation (as a result of all this QE), how does that level of private debt get serviced?

I was watching Martin North on DFA last night. In his household survey, it looks like in the next 2-3 months around 40% of households with mortgages are going to have difficulty servicing them. That could result in a lot of debt going bad this year. Where that leaves property values is open to many outcomes, but probably downwards.

There are a lot of property investors who were aggressive and used those equity release / deposit recycling financing techniques which led to the positive price feedback loop. This led to rising property prices, which then led to FOMO (& panic buying), and fierce bidding competition at property auctions.

Meanwhile the media and property market participants, property market commentators with their vested financial interests, further fueled rising confidence and property prices. This led to a belief that property prices do not go down by much.

In order to "win" at auctions, owner occupier property buyers were taking on very high levels of debt (& high debt service ratios). The high debt service ratios left very little room to maintain debt payments if there was an unexpected decline in household income in a recession (such as job loss, fewer hours worked for wage earners).

Now that economic conditions have changed, some highly leveraged owner occupier households are experiencing unexpected declines in household income causing potential cashflow stress, and taking a mental toll on households.

The objective for highlighting the higher risk levels, was to inform owner occupier households of these potential risks, so that they could prepare themselves and avoid putting themselves in a potentially vulnerable position, and avoid the associated mental toll on the family.

To top it all off, there is Labour sitting there thinking that they allown can manage the situation.
OH BOY we are screwed!

To top it all off, there is Labour sitting there thinking that they allown can manage the situation.
OH BOY we are screwed!

How much did Queenstown crash by in 87? It's not their first Rodeo...

Property prices gained about 70% from 2013? in worldwide economic calamity news, keeps on coming - There're heaps of domino effects worldwide. Sharemarket, Tourism, Restos, Hospitality, Hotel/Motel/AirBnB, Airlines, Airport, JOBs looses, Private/Commercial Landlords, Banks etc. - so domino effect on RE/Properties? - some economic expert assertion, is down by 10-20% (still 50% up from 2013 anyway).
In every downturn, opportunities presented. 'When unfortunate befallen for one side, but the others benefited-we called it's just business'
Same with other addiction industries: alcohol, gambling,tobacco/vaping,sugar. IF others scaremongering/DGM, and it's your turn to be upbeat/BGM on this (Bright Glitter Merchant)... like what I always do right now.. It's Never Been A Great Time to buy RE now, spend spend..

Just clarifying "widespread mortgagee sales" for those who want to troll at a later date:
- sufficient mortgagee sales that leads to considerable instability in the housing market risking a collapse, or
- that experienced in the US sub-prime crash in the GFC.
There will be a number of forced sales - due to SME collapses and unemployment - and mortgagee sales.

26
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The corollary is that house buyers need to be 'courageous'. The banks can get a bailout, but if you lose your job and end up on the street, you don't get one. There is no 'courage' when your losses are undewritten by depositors, taxpayers and the RBNZ.

10
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Discretion is the better part of valour. The solution to a debt problem is not more debt.

I'm not advocating people take on more debt, I'm highlighting the misappropriation of the word 'courage' used by Adrian O is for Orrsome at the RBNZ

Wasn't Ben Bernanke's memoir called "The Courage to Act" bailing out the "too big to fails" while the little guy got crushed was somehow courageous.

Indeed...the solution for more NZers, especially the young and future generations who will be paying for the debt run up to protect lifestyles now, is to create a bunch more affordable housing. Especially given the role housing has played in security and wellbeing in NZ for over a century (very interesting research by the RBNZ covering NZ during the depression years).

Further to that small business needs to be courageous as well, as business owners if we want take up the "government underwritten" loan scheme, we will still have to sign personal guarantees, which put our other assets (ie family home) at risk. So not only does a small business in Lockdown 4 need to come up with the extra to get our staff up the governments 80 percent level of their pay, to afford that and the significant loss of revenue we are going through to survive we are putting our family homes on the line. And what risk is the bank taking?? Banks have negotiated themselves in the best possible position, in the circumstances, not surprising though because there is 4-5 of them to talk as one voice, but there is thousands of small businesses with no united voice.

And from a depositor's perspective i am not really interested in the bank i have deposited with being "courageous"with my money even if it is Govt backed to 80%.
I don't take the pathetically small interest payments on the chin so that someone else can randomly gamble with my funds.

I have done a quick search of this article looking for the words 'business' or 'enterprise' and found they aren't in it at all. So my question is with the Government saying they will share the risk, where is commercial loans in this? House trading does not provide employment or the means to repay a mortgage. If a business owner rocks up to a bank today to get a loan to carry them through this period and perhaps fund a revamp to better operate in the new world, what would it cost? Looks to me much like the banks are still trying to prop up the property market which may come back to bite them.

It is not only the banks propping up the home prices, it is the government, the two of them combined seem to have it at a higher priority than small or medium size business, they came out with the support for homeowners via the six month mortgage deferment plan (which by the way the banks could have organised and promoted themselves but had the government do the donkey work on as what looks like a quid pro quo I'll make you look good you make me look good) well before business "government underwritten loans" for businesses.

We all screwed. 50 million for saving media. And we get up in the air about a 10K donation to a political party that is not declared. It's criminal.

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Why The Banks Are Bastards
Here we are in a new world. A world where every thing we believed in or understood will change perhaps for ever, but one thing hasn’t changed and that is the rapacious attitude of the banking system. I’m sure all of you have received a warm a fuzzy letter from your bank. ‘We’re here to help you “ and all that crap. Well let me tell you that the banks are continuing to cream us all without blinking an eye. Today I got a letter from my bank which renewed the pathetically small overdraft my business has used on occasion. They were pleased to advise me that if I use the overdraft the interest charge will only be 16%. Yes that’s right. 16% and I should grateful for this generous offer. But wait there’s more. If my overdraft should go in excess the interest rate will be 29% plus fees naturally. I almost swooned away with this act of generosity. Here we have the banks borrowing huge amounts of money from the Reserve Bank at almost zero percent, and only marking it up by a 1000% to lend it to you and me. As for credit cards, check out the interest rates they charge if you dare to use some credit. 18% is standard or if you are very lucky maybe 14%. In this climate people needing a loan will go broke paying the interest let alone the principal. But hold everything !! When the banks borrow from the Reserve Bank they get a free guarantee of 80% of what they lend out. Yet despite almost free money and a RB guarantee the banks still charge rates that are pure racketeering. So I annoyed was I about this rip off I fired off letters with evidence to our Dear Leader and her assistants, plus to other members of our Parliament. To be fair ( I’m not biased as you can see) I got swift replies and “tut tuts” from all of them: “ this is disgraceful” or “we have passed on your evidence to the “Minister of Silly Walks“ or whatever.
Well I‘m still waiting. Checking the various bank websites, the rapacious interest rates are still up there for all to see. Here we are on the edge of another Great Depression, and our friendly banks are still charging like wounded bulls.
Seriously, I believe that with interest rates of this magnitude there will be a Tsunami of defaults in the next few months, and when the flood of defaults reach the maximum it will be the banks that will go broke. It may serve them right but we will all be carried away in the ensuing flood. It might be a good idea, in the circumstances, to draw out your cash from your bank and hide it away somewhere. When the banks start to wobble the first thing they will do is freeze accounts and only let you draw out a few dollars every day. It has happened before in history many times. Those who don’t learn from history are bound to repeat the same mistakes.

Great comment.
I'm getting the last of my cash out. The NZ banks and government can do all they want to create an image of stability but we are a speck of dust on the global economy and looking at the US, it is going off a cliff.

Spot on Big Daddy! People need to take off their rose tinted glasses and really look at what is happening. There is a lot of information out there but mostly not reported by our woefully inadequate press. I look at overseas commentators and translate it to what I see here. Basically the same story everywhere. If you are a big corporate who has stripped the business of cash through share buybacks you can get loads a cash from the FED or any other central bank.... If you are a bank you can get loads of cash from the Fed or any other central bank ... if you are a small to medium sized business you can apply to the bank, wait for your turn and they might give you a loan at great cost to you..... but a nice tidy profit to them as long as you pay it back. If you don’t they will use the security that is likely in place and take you home. The middle classes will likely be ruined especially in America but this was the plan all along.

I look at the banking system as a cartel that is sucking the profits from productive output of the economy. How they justify the wages they pay to executives and why we tolerate it - I have no idea. Here's hoping that's all about to change.

Banks have turned into government back thieves in my opinion. Was listening to Martin North last night. He used to be a banker but now can't understand what the hell is going on with the sector. As he said, bank managers used to be respected within the community - similar to a priest or Dr. But now they're considered as well respected as a used car salesman. I think greed and self interest is one cause.

Have you looked around for alternatives? Do you have a solid credit history?

I agree, at face value that is completely unacceptable. Maybe some others here can recommend another finance provider?

How are they borrowing money "at almost zero" Big Daddy ?

Notice people who pay rent got NO extra help at all.
So, as accommodation supplement has a ceiling above which it tapers away, people without mortgage got less help than those with a mortgage. This is stupid. Because incomes have taken a hit and rent remains fixed, these people are paying rent at expense of other expenses, esp food. Hence huge increase in numbers in S Auckland going to get food from charities. Considerable mistake by government.

I remember them saying "there won't be repercussions if you don't pay your rent". So they say "refuse to pay rent for 3 months and your landlord can't kick you out. Merry christmas". I'm sorry but a contract is a contract. If the bank wants to defer mortgages for 3 months, that's fine there's a legal contract you'd sign with the bank backing that up. But if I refuse to pay rent, there's no contract backing that. Only a law which stops the original rental contract you signed from taking effect and kicking you out. I voided that contract already by refusing to pay rent for 3 months.
I'm not a lawyer so I don't know a lot of legal stuff, but it strikes me as very dodgy, from both a legal standpoint and an ethical one. Like they're saying "It pays to be a bad person. Be a good person and pay your rent and you'd suffer!".

EDIT: errm...I think I replied to the wrong comment on the wrong tab of my browser. Removed.

In my opinion the banks have already been quite courageous with their lending, given our private debt levels/gdp.

But courageous could easily be swapped with foolish - I guess we're soon to find out!

https://www.ceicdata.com/en/indicator/new-zealand/household-debt--of-nom...

Any bank lending at 7x income is an accident waiting to happen. Presumably courageous lending is offering a car loan as part of the package.

I've heard of a number of companies who have been looking to use the loan guarantee scheme but have either been basically laughed out of the bank or asked to put up their house as collateral. If you think the banks are looking to lend a hand - even with government backing you're dreaming.

And if/when house prices start to tank you can see how the whole system collapses on itself.

Exactly, we did the same and were asked to sign personal guarantees, for a government underwritten loan, sounds crazy to me.
Normally two reasons why I would borrow money;
a) to fund cashflow in a growing business
b) to fund new equipment or tech to improve productivity or efficiency
But to put my house on the line for this loan into a business environment which is very uncertain I would not normally take bet on, the government and banks need to be encouraging us not forcing us to put our family home on the line!!

So you want a bank and the government to put money into your business ( so they have skin in the game ) or me as the tax payer if we have to bail the banks out because they madly lend to you with no security, but you do not believe in your business enough to put your house on the line. If you dont have skin in the game where is the drive and commitment from you to make your business work and prosper so you can pay them back ?

I'd suggest that you have a look who's not getting it - many businesses were becoming increasingly nonviable before Covid-19, and most of those certainly won't get through this with or without additional bank support. I expect bankers to support the viable, but none else otherwise theyre throwing away 80% of taxpayers money in addition to their 20%. But of course the public and bloggers are the experts in what is a viable business.

It seems astonishingly naive of AO to believe words from the RBNZ will have any effect at all on commercial lending decisions. Are the banks supposed to revise their credit modeling because some bloke in a plaid shirt told them to be courageous ?

This week we also had the proposal to scrap LTV limits under some ridiculous guise that LTV limits had taken the froth off the housing market.

It's as if RBNZ are trying to use an invisible hand to control the tap of bank lending. Fat chance of that ever happening.

Mr Orr seems to have also forgotten that even if in some parallel universe banks listened to the central bankers, ^our banks^ are predominantly listed Australian companies not local firms.

Someone needs to wake up and smell the coffee.

KiwiBanks next update should be interesting from the publics perspective. In February they reported that they had taken on a lot more lending (particularly business loans!) but where earning no more revenue because their margin had contracted. They where also throwing a lot more money at "transformation" so profits where lower.

Now the tide is going out we will see who's been swimming naked I suppose.

Excellent news, OZ Banks are all now, waiting for customer, investors want to be, with wages subsidy, LVR-FHB deposit gone, these are good news to provide loan in to Real Estate, properties sectors were limited on their Essentials contribution during the lock down, due to close contact between peoples. However, the private & commercial Landlords have shown they resolute contribution, therefore in level 3, more contribution are expected in the horizon, properties visits are allowed as this shall smooth out the Banks credit loan into boosting up economic activity, The Airlines & other export based services, will get more banks lending back up by their RE purchase valuation, that's how it should work in the F.I.RE based economy productivity.
https://www.scoop.co.nz/stories/HL1507/S00101/the-fire-economy-new-zeala...

Americu is going great gunze......Their leaderr is gonna be the furst manger to tri this startlung idea. He will be in the pink, but don't hold yer breff.

Praise the lawd.

https://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=12327415

Here is anuvver stimulating article for Mr Trump to add to his collection. Nevada will be so delighted. Maybe we need similar to stimulate our Interest. ....Nod nod...wink...wink...here Take this with the spirit it was given..ya gotta laugh.

https://www.zerohedge.com/personal-finance/nevada-brothel-causes-stir-st...

We will only know the truth about what the Banks are doing when customers and Mortgage Brokers start giving feedback .

And given the world is seized with social media right now , the "truth "or at least reality is likely to be known very soon .

If banks are tightening lending , as we expect they are , it will soon be evident

Olly Newland says wait 18 months to really feel the pain. So maybe good buying spring 2021.

You could be right, but I say.. NOW it's never been a good time to do the... viewing only... online. If you savvy enough like Sir JK, then probably just click Buy Now.. for the properties, from his remaining ANZ shares valuation? he heh..rinse & repeat.

How big is Rabo David? compare to those of F.I.RE economic Banks you've mentioned ;-)

What's that yank thing when you can't pay the mortgage? Leave the keys in the door and walk away or something. No problem.

Amidst the DGM, I liked this person input, a neoliberal follower which already need to protect his RE valuation:
Here's his cool BGM/Bright Glitter Message:
https://www.stuff.co.nz/life-style/homed/121227636/heres-why-house-price...

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