BNZ tightens rules for non-NZ & Australian citizens seeking loans to buy houses; ASB policies 'under review'

BNZ tightens rules for non-NZ & Australian citizens seeking loans to buy houses; ASB policies 'under review'

BNZ has become the third of New Zealand's big four banks to tighten the screws on offshore house buyers looking for a mortgage.

Its changes come after ANZ and Westpac unveiled changes on ThursdayMeanwhile, an ASB spokeswoman said her bank had not made any changes to its policy in this area, "but it is currently under review."

"As part of being a prudent lender, BNZ is constantly reviewing and adapting our lending criteria to reflect current conditions, and as a result we are changing our policy on how we recognise foreign income for lending," BNZ says in a statement.

The changes include;

1. Foreign income of people who are not New Zealand or Australian citizens, or do not hold a current permanent residency visa won’t be recognised for servicing purposes. This is the case, regardless of whether or not they reside in New Zealand. 

2. New Zealand and Australian citizens and permanent residency holders, who are not currently residing in New Zealand using foreign income to service a loan will now have a maximum allowable LVR of 60% [down from what typically would be 80%]. Customers in this category will also have a 40% shade applied to the value of their income earned overseas, when calculating their ability to service the loan. This means if a customer is a NZ or Australian citizen who is living overseas and earning income overseas, only 60% of that income will be taken into account when we're considering their ability to service a new home loan in NZ.  

BNZ says it has "a robust income verification process" for all lending.

"These policy changes reflect our commitment to implementing best practice policies for our wide customer base."

The moves by NZ's big banks come after their Australian parents halted lending to non-residents and temporary visa holders earlier this year. Subsequent to that The Australian Financial Review reported both ANZ and Westpac had discovered they had approved "hundreds" of home loans backed by fraudulent Chinese income documents, allegedly put together with the assistance of mortgage brokers.

Interest.co.nz reported last week on suggestions of mortgage fraud in NZ along the lines of that reported by the AFR in Australia.

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.

35 Comments

Comment Filter

Highlight new comments in the last hr(s).
10
up

JK: There is No housing crisis in Auckland
BNZ, WESTPAC, ANZ: Winter is coming, you know nothing JK

JK believes in See No Evil, Hear No Evil and if you do not see and hear you cannot say much about Evil. So where is the housing Crisis. All New Zealanders who voted for me and the media is all wrong and knows nothing. Only the minister of National party are right.

There is very little lending to overseas buyers. Overseas buyers of houses in NZ don't rely on a NZ bank to lend them money. This will make very little difference.

It would be interesting to see if it at least helps isolate tracking overseas purchasers not borrowing from local banks, especially using proceeds of crime.

Well to be honest it's not really the banks that I'm worried about. If the Government eventually follow through with the more international AML measures, how can we really protect NZ from those Non-resident buyers who can purchase property without requiring a mortgage. And can use other methods to bypass and disguise their banking, by going through their student children's accounts or use other money mules?

How do we safe guard against corrupt Real Estate Agents, helping to assist in dodgy dealings with Non-residents who want to hide their capital or launder money via NZ's housing market?

Lets face it Real Estate Agents are not know for their trust worthiness.

I'd be interested to know if that is true.

Surely foreign banks struggle with the idea of security being in another country?

Try going to a NZ bank and ask for finance to purchase a property in another country - It would not be a straight-forward exercise by any means.

If the rumour mill is true, students on temporary visas are purchasing on behalf of their foreign domiciled parents. This behaviour wouldn't show up on the stats released last month for foreign buyers.
There is the possibility that these students borrow from NZ banks using foreign income to service (sent from parents).

This activity would all be blocked under the new banking rules (no purchasing by Temp Visas using foreign income to service).

NZ Banks could curtail this if they wanted to. Trouble is, they have shareholders to pay, dividends etc.
Banks are your enemy, not your friend.
If you can't afford to buy it in cold hard cash, then don't buy it.
And shut the borders whilst your at it, stop the interlopers.

Bit of a mess really, isn't it ? And the people in charge stand in a circle and point to the one on their left.

Well one could quote Mr Francis Urquhart on that.

The thumb-screws ARE being tightened - by Govt, RBNZ, APRA and Banks

If price pressures continue up over the coming months there is only one conclusion, foreign buyers with unencumbered deep-pockets overflowing with rivers of cash

Seal the borders? Tell the foreigners to take advantage of their return ticket They are welcome to spend thier money, enjoy, and leave in an orderly fashion. What else is there?

not just students, I know Chinese residents with big mortgages who can not survive on their NZ wage and a portion is paid by their overseas parents.
will be interesting to see how this all plays out,

How do you know that? For all we know they are lending up the wazoo to buyers without residency.

It sounds like the banks have decided that lending money to little Johnny Zhou on his "student" visa to hoover up million dollar houses in Auckland in the midst of a housing bubble is a bit stupid. Especially given the recent reports of widespread mortgage fraud originating from you know where.

Aha! So. By their own words, the BNZ has been imprudent!
Excuse the pun, but you can bet your bottom dollar that the loans to unverified foreign persons are not included in the list of elite mortgages in the "covered bond" pool!!!

This speaks volumes. http://www.afr.com/real-estate/residential/foreign-property-investors-tu...

What will happen when foreign buyers come to refinance? Will their loans be shaded? I suspect it means that banks fear for their own equity in the event of a default, which would indicate that they feel the market is overvalued. It seems from the story I have pasted a link to, that banks have been less than prudent in advancing money to overseas investors/speculators/crooks/money launderers, in Australia at least.

We really need some good investigative journalism in this country.

And just remember that it was dodgy mortgage stuff that brought the world to the brink nine years ago. We still haven't recovered.

Banks fear nothing including the RBNZ.....that the public will ever really know of until it's way too late for whomever, depositors or borrowers. The 'too big to fail' mantra will save them all is what they like to believe after 2008.

They like to play the confidence game, all that optimist vs pessimist BS. but behind the scenes im quite sure it's different. Selling debt upon debt upon debt will have it's day of reckoning to be sure

When property prices keep rising at some points these banks must be thinking that they are carrying too much risk making new loans?

No. Never if CEO bonuses are paid out based upon market share....

Anyway all banks are smelling something but the Government as are in winter and must have got cold or running nose.

They should take some medicine as are spreading it to everybody - Housing Sickness.

Atleast Act Now Mr PM

Overseas buyer who are paying million to a 800000 property does not need loan and has so much black money at home that does not mind paying a high premium to convert and send unofficial money (in China, if the government finds out about, you are in deep trouble) out of china.

Everyone know but not our innocent government.

Aren't there a couple of Chinese and Indian Banks operating in NZ, if so why would overseas buyers be worried.

They may not lend to fellow countrymen - they may be able to see their real financial position...

Har, le deluge....

We just need the other four-pillar Oz bank to declare its hand. Its really just Financial Elfin Safety, nothing to do with a pin on a stick behind the curtain.....

Good step but will not help as many overseas buyers are cash buyer. Money laundering.

When you borrow money you do not papmillion for 800000 property in 2 months. It is only when you want chanelise offshore unoffical money.

Banks are foing so RBNZ does not bring in strict measures which sre needed urgently NOW.

EVERYONE IS PLAYING A GAME AND IN THE GAME IS ONLY ONE LOSER - NZ.

Any finance that enters a computer system is traceable. It depends on how deep someone wants to look.
Some think they are clever, but never underestimate those who care. Latte's are for posers. Plenty of them around. Up to them.
Cash is King.

How correct. Only one loser that is people of NZ.

It is govt responsibilty to act but they are immune to evrrything. Shame

Maybe the banks are seeing some defaults from the loans or worried about Chinese banks folding? Anyway... Good.

BNZ has had these rules in place for a while now (unwritten) now they are showing the media so they look like they are doing the right thing....what this is the minimum, but trust me, any NZ overseas fat cat will be able to bend these restrictions backwards...

nothing new here.

Was talking to a property agent today and was saying that his trade is confident that as long as John Key is the PM house price will keep on going up as he will never allow the housing bubble to burst and price fall. Also was of the view that by chance if national is reelected in his term will touck Auckla d median to 1.5 million.

He is correct as it is not as if the PM is not aware when every day new landmarks are broken in house prices and highlighted by media.

So the only hope for first home buyer is that National govt should go or forget about even dreaming of owning a house in NZ.

Maybe they can forget about owning a house in Auckland, but I would imagine most FHBs already have.

Thing is, with the likelihood of loan-to-income restrictions coming in to place, who would be left to purchase a 1.5mill property? even if they go for a ratio of 6/1 then you need to be earning 200k to get a loan in addition to your 300k despoit.

Well logically even with 1 million and loan to income restriction, how many will be able to afford. Without loan to income ratio even if I want to buy a property of million n pay 200k deposit and assuming i get a loan of 800k my mortage with rates/insurance will be weekly appox 1100 n the salary has to be good after tax to service 1100 weekly with current low interest rate and if interst rate goes up - which will at some time than weekly mortage will go up to 1300 to 1400.

This shows that even now only people who already have a property n buying second property or downsizing are able to buy OR Overseas buyer.

Moral of the story is that first home buyers are already out.

Well logically even with 1 million and loan to income restriction, how many will be able to afford. Without loan to income ratio even if I want to buy a property of million n pay 200k deposit and assuming i get a loan of 800k my mortage with rates/insurance will be weekly appox 1100 n the salary has to be good after tax to service 1100 weekly with current low interest rate and if interst rate goes up - which will at some time than weekly mortage will go up to 1300 to 1400.

This shows that even now only people who already have a property n buying second property or downsizing are able to buy OR Overseas buyer.

Moral of the story is that first home buyers are already out.

Need a fourth term to cement over the burial plot of the egalitarian Kiwi dream by these arrogant neocon banksters.

http://www.nbr.co.nz/article/book-extract-home-truths-–-confronting-new-zealand’s-housing-crisis-183320