ASB is joining other banks in increasing the size of the deposit it requires from residential property investors seeking a loan.
Late on Friday ASB said it was increasing the deposit required from investors to 40% from 30% effective immediately.
“We’re concerned the continued high levels of investor demand are unsustainable. So effective immediately we are increasing the deposit required from investors to 40% from the current 30%,” ASB’s CEO Vittoria Shortt said in a statement.
Loan pre-approvals already in place are unaffected, ASB said, with the change applying to home loan applications and top-ups that haven't yet been conditionally or fully approved, and rollover of existing conditionally or full approvals at expiry.
“We are very focused on being a prudent and responsible lender. We all have to play our part and this decision to immediately increase the deposit required from investors is about ensuring a balanced and sustainable housing market which is in the best interests of all New Zealanders,” Shortt said.
In last year's September quarter ASB grew its home loan book by a net $1.895 billion, or 3.14%, to $62.236 billion. That quarterly increase was the biggest among New Zealand banks. December quarter figures aren't yet available.
On Wednesday BNZ said due to unprecedented housing demand, it was prioritising existing customers and applying a 40% equity requirement for new loan applications from investors who come to the bank via brokers. BNZ's 40% deposit, or equity, requirement is also up from 30%. And ANZ also increased deposit requirements for investors to 40% in December.
Having removed restrictions on banks' high LVR residential mortgage lending last April, the Reserve Bank said in November these would be put back in place in March. At that time Deputy Governor and General Manager of Financial Stability, Geoff Bascand, told interest.co.nz the Reserve Bank intended to “reinstate the restrictions we had in place in April before we removed them”.
Specifically, Bascand said this meant no more than 5% of a bank’s investor lending could go to borrowers with deposits of less than 30% (IE most investors need a 30% deposit). And no more than 20% of owner-occupier lending could go to borrowers with deposits of less than 20% (IE most own-occupiers need a 20% deposit).
Major banks requiring a 40% deposit from investors thus goes further than what the Reserve Bank has indicated it plans to require.
In November ASB recommitted to requiring investors to have a 30% deposit rather than 20%.