Westpac has introduced a new low equity margin tier for lending between 80% and 85% loan-to-value (LVR) mortgages.
The change, to be introduced next Tuesday, will mean all new lending between 80% and 85% LVR will have a low equity margin of 0.25% pa added to the carded/agreed loan interest rate.
All other low equity margin tiers will remain unchanged.
A Westpac spokesperson confirmed that the new charge would apply only to new lending. It would not apply to existing clients with a current LVR of between 80% and 85%.
Prior to this announced change, Westpac had applied a low equity margin only to all lending over 85% LVR.
Low equity margins are imposed by all lenders, although each has their own criteria.
ANZ impose +0.50% "Low Equity Premium" when the LVR is 85.01% to 90.0%, and +1.25% for LVR lending of 90.01% and above.
ASB say they apply a "Low Equity Fee" ... "when you have less than a 20% deposit". The amount of this fee "varies", they say.
BNZ says a "Low Equity Interest Rate Premium may apply".
Kiwibank's "Low Equity Fee" is +0.50% of the loan amount for LVR loans above 80% but less than 85%, is 0.75% of the loan amount where the LVR is between 85% and 90%, and above that you need to pay Lenders Mortgage Insurance premiums.
Westpac says it has introduced this new tier to reflect the additional risk for lending "in the high LVR space".
The Westpac low equity margins compare as follows:
| ANZ | ASB | BNZ | Kiwibank | Westpac | |
| where the LVR is ... | % | % | % | % | % |
| 80.00% to 85.00% (new) | 0.00 | +0.25-0.50 | 0.00 | +0.50* | +0.25 |
| 85.01% to 90.00% | +0.50 | +0.50-0.75 | +0.40 | +0.75* | +0.50 |
| 90.01% to 95.00% | +1.25 | +1.00 | +0.50 | LMI | +0.60 |
| above 95% | +1.25 | +1.20 | neg. | LMI | +0.75 |
(* Kiwibank charges this as a fee based on the loan amount rather than as a premium on the interest rate as the other banks in this table do.)
Low equity margins are added to all base mortgage rates and apply for as long as the total loan exceeds the LVR limit. They are automatically adjusted or removed as the LVR changes, usually as a result of principal repayments by the customer. They can also be adjusted or removed if the property 'value' rises, although it will usually require the client to get and pay for a valuation that meets the bank's standards.
See all banks' advertised home loan rates here.
A quick summary of current home loan carded interest rates are in this table:
| 1 yr | 2 yrs | 3 yrs | 4 yrs | 5 yrs | |
 |
5.19% | 5.45% | 5.80% | 6.10% | 6.30% |
 |
5.19% | 5.45% | 5.75% | 5.95% | 6.25% |
| BNZ | 5.25% | 5.40% | 5.80% | 6.10% | 6.30% |
| Kiwibank | 4.99% | 5.25% | 5.65% | 5.99% | 5.99% |
 |
5.19% | 5.40% | 5.90% | 6.15% | 6.25% |
| Co-op Bank | 4.99% | 5.35% | 5.75% | 5.99% | |
| HSBC Premier | 4.99% | 4.99% | 4.99% | 5.50% | 5.75% |
| SBS / HBS | 4.99% | 4.99% | 5.65% | 5.99% | |
 |
5.25% | 5.30% | 5.75% | 6.10% | 6.30% |
TSB Bank has a Special 15 month offer of 4.95%.
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(Updated: Headline corrected: changed from referring to "low LVR lending" to "high LVR lending". Thank you Andrew in Finland.)
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