ASB tries to kick start weak mortgage market with enticing offers to first home buyers

ASB tries to kick start weak mortgage market with enticing offers to first home buyers

By Gareth Vaughan

ASB, which recently revealed a contraction in its mortgage book and a market share drop, is targeting first home buyers with mortgage applicants in some cases requiring less than a 10% deposit. It's doing so at a time of record low house sales. has heard from mortgage brokers that ASB is currently the most aggressive of the big banks, and is now prepared to loan up to 95% of a house purchase price compared with a previous limit of 90%. The bank is also offering to help cover mortgage customers' legal fees and insurance.

Asked about this Mike Davy, ASB's general manager for lending, said late last year the bank had "broadened its offering" to first home buyers with new options for customers with less than a 20% deposit.

"Applicants will still usually need at least a 10% deposit, and must to be able to sustain their loan repayments," said Davy.

"However, each application is assessed on a case by case basis regardless of the deposit size. A low equity fee applies for customers borrowing above 80% of the property value. A contribution towards legal fees may be available for some customers, and this is discussed at the time of application.”

ASB's recent half-year financial results showed its NZ$37.5 billion mortgage book, the second biggest in the country after ANZ's, dropped in value by NZ$270 million in the six months to December. ASB's housing market share also fell, to 22.4% at December 31 from 23% at December 31, 2009 and 22.8% at June 30 last year.

CEO Charles Pink surprisingly quit ASB last November and has been replaced, until a new permanent CEO is announced, as acting CEO by ex-retail head Ian Park. Although its mortgage book contracted, ASB's net interest margin increased 0.4% to 2% in the six months to December as home loan customers shifted to floating from fixed rate mortgages.

ASB's targeting of first home buyers comes at a time of record weakness in the housing market. The latest Reserve Bank sector credit data shows mortgage lending fell in December, month-on-month, for the first since the central bank started collecting the data in June 1998. The Reserve Bank says mortgage credit fell by NZ$50 million to NZ$170.95 billion in December from NZ$171 billion in November. That's the first monthly absolute dollar decline. The previous low was an increase of NZ$101 million from September to October last year.

The latest weekly Reserve Bank mortgage approval figures, for the week ending February 11, show 5,387 approvals valued at NZ$724.4 million. The volume was down 11.5% year-on-year and value 7.4% lower.

And the Real Estate Institute of New Zealand's latest monthly statistics show the volume of house sales at their lowest point in January since those records began in January 1992.

BNZ and Westpac, the only two of the big five mortgage lenders to have released December quarter general disclosure statements so far, recorded combined mortgage growth of just NZ$223 million.

Meanwhile Kiwibank recently launched its second "limited time only" mortgage rate cut for 2011, this time to its six month fixed-term rate, as it too strives to kick start the mortgage market.

* This article was first published in our email for paid subscribers earlier today.  See here for more details and to subscribe.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

Your access to our unique content is free - always has been. But ad revenues are diving so we need your direct support.

Become a supporter

Thanks, I'm already a supporter.