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The country's largest home loan lender adds 50 bps for 'new' low equity loans

The country's largest home loan lender adds 50 bps for 'new' low equity loans
10th Oct 13, 7:51am by David Chaston

(Updated with corrections; there are no higher rates in the new structure.)

ANZ has changed its home loan structure, splitting into two categories following the new RBNZ LVR rules, according to changes revealed on its website this morning.

It's new 'standard' rates now reflect is best offers and apply to borrowers who have existing mortgages and new borrowers who who have at least 20% equity.

Inside this change, it has pushed through increases for one year and two year fixed 'standard' rates.

It's new standard six month fixed rate is the previous 4.95% 'special' for that term.

Its new one year standard rate has been set at the same level as the previous 'special' of 5.19% raised to 5.69%, up 50 bps from its previous 'special' 5.19%.

Its 18 month standard rate becomes 5.59%, the same as its previous 'special' for the same term, and the six month 'special' is also retained at 5.45%.

Its new 2 year fixed 'standard' rate becomes 6.45%, up 50 bps from the previous 5.95%.

No other standard rates have been changed at this time.

In addition, it has added a new category for 'Low Equity Home Loans'.

These home loan interest rates apply to new home loans with less than a 20% equity or deposit, "unless the customer is refinancing a home loan from another lender".

They website also say "a low equity premium and some conditions apply" suggesting the LEP is on top of these higher rates.

The rates for 'Low Equity Home Loans' are 50 bps higher than 'standard' offers.

They compare as follows:

ANZ Standard Low Equity
  % %
6 months 4.95 5.45
1 year 5.19 5.69
18 months 5.59 6.09
2 years 5.95 6.45
3 years 6.50 7.00
4 years 6.90 7.40
5 years 7.10 7.60

Compare all carded, or advertised, bank home loan rates for all lenders here. 

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Fixed mortgage rates

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Source: interest.co.nz
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5 Comments

by  JimboJones  |  10th Oct 13, 10:48am 1381355297

Its about time this happened - I always wondered why banks tended to have the same interest rates for risky lending as for safe lending, with the exception of a few special rates.  Maybe there should be another tier, say 40% equity.

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by  Boatman  |  10th Oct 13, 11:09am 1381356582

Managing a multi-tiered book is always a difficult task .

 How do you ascertain precisely what the LTVR Ratio is , with some parts of Auckland house prices growing at 15% per annum time will take care of the risk  , while other areas prices are stagnant or declining . It will require constant re-valuation of the book by the bank to ensure fair play .

Then , who is the riskiest client ?

A Doctor in private practice with little or no savings , a $1,500,000 , LTVR 100% mortgage , a $100,000 credit card , two cars on the drip and a $400,000 overdraft.

or The Pacific Islander family both  on the minimum wage with a $300,000 mortgage with 95% LTVR and no other debt ?

The poor Pasifika family with the low debt will bear the brunt of the new rules , even though the areas they live in are seeing the highest house price increases.

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by  David George  |  10th Oct 13, 12:13pm 1381360403

The Banks use the purchase price OR valuation - whichever is the lowest - for their LVR. I don't know if our Banks update them to market value but in the States they got the accounting authorities to allow them (Banks) to pretend the houses were still worth their purchase price even though prices had dropped by 50% or more in some cases. Big mess.

Quite scary how much debt some folk get into - like your Doctor - I know a lot of folk in their mid fifties that have still got a mortgage on their house. You've got to wonder how some of these fools taking on these million dollar mortgages in their forties ever hope to retire or help their kids out. And good luck if one of them gets sick or looses their job.

I believe the RBNZ now require any debt - (CC, HPetc.) where the house is security to be regarded as mortgage debt for the purposes of the new LVR regulations.

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by  Money Man  |  10th Oct 13, 1:32pm 1381365162

KiwiDave,

You are pretty  much on the money here that Banks use either QV , Purchase Price or Regsitered Valuation when calulating LVR's. They usually use the most recent until then default generally to QV if this has been the last interaction:  Purchased in 8/2011 at PP and RV of $300,000  then new QV's come out in 9/12 at $310,000 then they would use this for both new loans to clients and also when conducting senstivity analysis on the portfolio's. While QV's are an exact science they are suitable for portfolio analysis as there will be those worth more or less then QV.

Yes. RBNZ does take into account any debt secured by a property (ssecond maortgage and alike) as in general Bank mortagges contain clauses that means the mortgage covers present and future facilties including credit cards / personal loans etc. Appears theseclauses in mortgage  while handy for banks to recover debt has impacted them in LVR scenerio now in place.

Also Banks can't give clients personal loans or credit cards to form part of the deposit to keep Home Loan under 80% LVR as its seen as being against the spririt of the rules.

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by  Machiavelli  |  10th Oct 13, 5:01pm 1381377661

I believe the RBNZ now require any debt - (CC, HPetc.) where the house is security to be regarded as mortgage debt for the purposes of the new LVR regulations.

 

A major implication that I have only seen mentioned briefly is the impact this will have on small businesses in NZ. Most people I know use borrowing secured against their homes (and credit cards) for funding in the early days of business. These people generally don't have a lot of equity at that stage of the game so will often be pushing into high LVR territory to fund business activities. What will they do now? If they can't access funding, they can't invest and therefore can't get an ROI. Could this policy effect the governments tax take?

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