Big 5 banks giving little away on whether residential property investors will face higher mortgage rates to reflect new RBNZ rules

Will new Reserve Bank rules see residential property investors hit with higher mortgage rates than owner-occupiers?

The Reserve Bank has introduced restrictions on banks' residential mortgage lending to Auckland property investors and made rules so loans to property investors cost banks more than loans to owner-occupiers. But no bank has yet introduced carded, or advertised, loan rates that differentiate between investors and owner-occupiers. And nor have they unveiled any specific Auckland investor rates.

The loan-to-value ratio (LVR) restrictions on Auckland property investors took effect on November 1, meaning borrowers generally need a 30% deposit for a mortgage loan secured against Auckland rental property. And the Reserve Bank has also established loans to residential property investors as a new asset class for banks, meaning banks have to hold more capital against loans to investors than they do for loans to owner-occupiers.

Asked whether they have any plans to introduce split rates for investors and owner-occupiers, the major banks are keeping their cards close to their chests, which suggests changes might be in the wings.

Below are the responses received by interest.co.nz from the big five banks.

ANZ, "There have been a number of regulatory changes affecting the residential property investor market recently. We’re currently working through this and assessing options."

ASB, "It's a no comment from us."

BNZ, "No - though it's still early days. We're always reviewing the impacts of new regulations for investors."

Kiwibank, "As always (we) are looking into strategies to best manage the new environment but currently are not looking at pricing levers."

Westpac, "Our rates and offers are constantly under review with the aim to reflect the market and meet customer needs."

In Australia the parents of New Zealand's big four banks have this year lifted interest rates for residential property investors above those for owner-occupiers. This comes after the Australian Prudential Regulation Authority told banks last December that growth in loans to property investors shouldn't exceed 10% of their portfolio, and as regulatory capital requirements are being increased. Westpac, for example, increased fixed rates for residential investment property by up to 30 basis points in August and cut fixed rates for owner-occupiers by up to 30 basis points.

In New Zealand more than a year before the Reserve Bank introduced restrictions on banks' high LVR residential mortgage lending in 2013, banks started offering "special" carded rates for borrowers with deposits or equity of at least 20%.

In its Financial Stability Report last week the Reserve Bank reiterated its estimate that average risk weights for investment property lending will rise by about six percentage points. For ANZ, ASB, BNZ and Westpac, who use the Internal Ratings Based capital approach, an initial risk weight of 30% implies a 20% increase in the minimum capital requirement for investment property loans, the Reserve Bank added.

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