ASB to adopt LVR restrictions immediately

Personal Finance

Banks are moving quickly to reinstate LVR restrictions now that they have the RBNZ's signal. The first to announce them is heavyweight ASB, which is moving 'immediately'

12th Nov 20, 5:07pm by David Chaston

Knowing that the Reserve Bank is moving to reinstate loan-to-value ratios (LVRs) has the main banks keen to fall into line.

The first bank to announce it will do so is ASB.

It says it is moving immediately to increase the minimum deposit required from investors in the wake of the Reserve Bank’s Wednesday announcement that LVRs are coming back in March 2021.

ASB’s Chief Executive Officer Vittoria Shortt said: “ASB believes a balanced and sustainable housing market is in the best interests of all New Zealanders. While we appreciate the RBNZ taking the time to consult, this is about helping Kiwis build their financial futures during exceptionally challenging times so we are choosing to take this step now.”

Shortt said the lending market has improved markedly since New Zealand went into its first lockdown. COVID-19 hasn’t impacted the property market as anticipated and ASB is now witnessing rapid growth in lending volumes.

“The number of applications we’re receiving is at an all-time high, up 70% on this time last year, and while the proportion of first home lending is up, we have observed since COVID-19 a rapid increase in lending for investors. If this increase in investor demand continues it could lead the country down a potentially unsustainable path," she said.

“Our focus at ASB is on working with the Government on offering first home buyers opportunities to get onto the property ladder. That’s why we’re immediately committing to requiring investors to have a 30% deposit rather than the current 20%. Pre-approvals already in place are unaffected."

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33 Comments

by J.C. | 12th Nov 20, 5:28pm 1605155311

Propaganda.

by northman46 | 12th Nov 20, 6:02pm 1605157377

Possibly. But it's welcome nonetheless. Presumable the idea is the other big banks will fall in line too?

by imhenry | 13th Nov 20, 7:19am 1605205190

Why have the Big Bank been waiting to be told what to do?

by kensinma | 13th Nov 20, 9:56am 1605214583

Westpac & BNZ never went above 70% anyway...

by Zack Brando | 12th Nov 20, 5:36pm 1605155760

Vittoria Shortt sounds reasonable [above comments/statements]. Will YouTube her.

by b21 | 12th Nov 20, 5:52pm 1605156731

This contradicts RBNZ claims from yesterday's announcement regarding LVR restrictions not being re-instantiated immediately due to banks need time to prepare for it.

by J.C. | 12th Nov 20, 6:11pm 1605157872

Yep. So much for the need for 'consulting.'

by DaveB1978 | 12th Nov 20, 7:06pm 1605161178

Except for pre approvals which is the key.

by ACB | 18th Nov 20, 1:36pm 1605659812

Yes it is nonsense that Banks can't do these things almost immediately - it's just a change in policy. And more to the point, they should be lending in a responsible manner, not because the RBNZ says so but because it is the right thing to do for their business.

by MortgageBelt | 12th Nov 20, 5:57pm 1605157035

Well, the PM is powerless to restrain house prices with any policy settings.
PM Jacinda Ardern on house prices: 'It just cannot keep increasing at the rate that is'

https://www.rnz.co.nz/news/political/430441/pm-jacinda-ardern-on-house-…
She sounds like she’s in the Opposition ‘this should not be happening’.

by J.C. | 12th Nov 20, 6:13pm 1605158000

She was always going to out of her depth on this issue. Empathy and slogans are no match for taking on the monetary system and all its manifestations.

by Fritz | 12th Nov 20, 6:29pm 1605158966

She's a kind and empathetic person but of average intelligence and she's a pragmatic conservative.
Totally not 'transformative' as per her first term slogan.

by J.C. | 12th Nov 20, 6:49pm 1605160169

Yes, she is a kind, caring person. And yes, she is not a leader of change. I prefer to focus on her positive qualities. Also, I don't think any political leader in NZ has the kahunas to deal with this.

by buyandhodl | 12th Nov 20, 6:21pm 1605158466

1) She dodged CGT so kept the incentive to invest in property over other assets -> increase investment demand and therefore house prices in constrained market.
2) She ignored Treasury's advice in the last term that the problem is supply not demand - gave FHB extra $$ - effect predicted by Treasury (and what has occurred) is inflation at the bottom of the market.
3) Ignored evidence that problem isn't market not wanting to build houses, just that they are unable to with the planning rules in place - result is kiwibuild failure and no increase in supply...

What does she expect?

Tbh wondering if she listens to expert advisors less than Trump (except the reelection ones of course)

by J.C. | 12th Nov 20, 6:24pm 1605158677

She also doesn't understand how banks can create mortgages out of thin air, as long as they adhere to the capital ratios.

Her understanding is like that of many NZers.

Notice she tried to dash off before the questions were finished. Clearly out of her depth.

by Millennial_Woman | 13th Nov 20, 10:20am 1605216054

A heavy empty home tax or squatters rights would be a good start. Land bankers or even people who cant live in their home for legitimate reasons shouldn't be allowed to remove good housing stock and exclude others from a roof over their head.

by dago | 12th Nov 20, 6:15pm 1605158132

Too little too late. In real terms, still won’t have much effect for 2-3 months since existing pre-approvals are exempt.
Also, do they really think investors will lessen with a 30% LVR? Seriously? Make it 40-50% - then you might see some impact.
If they really want to help FHB, they need a tiered approach. I’m betting that this won’t impact people trading their nice 2-3 year capital investment for another house at all. The prices will continue to rise unless some drastic happens

by fortunr | 12th Nov 20, 7:03pm 1605161021

As I said in another thread, Orr and the RBNZ are full of s..t. and utterly incompetent.
They declared that they could not reimpose LVR restrictions before March, and a few hours later ASB declared that they will re-impose LVR restrictions immediately on all speculators:
"ASB says it won't wait for the Reserve Bank to bring back Loan to Value Ratio (LVR) restrictions for investors in March. It is doing it now. ASB will move immediately to increase the minimum deposit required from investors to 30 per cent"(NZ Herald).

It is high time to sack these clowns at the RBNZ and put somebody in charge who knows what he is doing.
By the way, I would put at least 50% for speculators, right now - 30% is way too loose, I agree with Dago's comment above..

by JimboJones | 12th Nov 20, 8:18pm 1605165486

Yet here we are in the middle of a global pandemic with higher than expected government tax take, lower than expected unemployment, and an economy that feels pretty good. Easy to criticise...

by imhenry | 13th Nov 20, 7:28am 1605205714

Is it not the Big Bank's business to run their lending in a prudent and professional way .Nah wait to be told then they can blame someone else for the mess

by SmoKey | 12th Nov 20, 8:24pm 1605165885

A very smart move. Now the ceiling is set for LVR. RBNZ cannnot seem to be stricter.

by Joe Public | 12th Nov 20, 8:35pm 1605166531

Great move by ASB, responsible lender. Now lets hope the others follow.

The house is on fire and the Reserve Bank wanted to consult with the fire department before allowing them to put out the flames.

Poor effort, time to sharpen up Reserve Bank.

by Nifty1 | 12th Nov 20, 9:49pm 1605170955

Its a good move by the bank/s to make the RBNZ look irresponsible and present themselves as dong the right thing. RBNZ credibility going down the drain.

by WellingtonInvestor | 13th Nov 20, 12:09am 1605179398

WHat I don't really uderstand is that these LVRs are supposed to prevent risky mortgages to investors. But if investors are't buying houses as a result of LVRs being reintroduced, then 1st home buyers or other NZers will be buying those same houses at those same prices. So aren't they then taking a big risk themselves, or the banks still taking big risks, with lending money to buying at these current very high house prices. I mean what happens if house pries drop 20-30 % due to a huge number of job losses. Apparently things are calculated to get a lot worse within the next few years.
There is so much FOMO now out there, with the media going on and on about how house prices are increasing every week, and if you don't buy yesterday you will just be paying more. It is a mess.
Someone needs to take control to calm the situation, because it could all go pop.

by BraveNewWorld | 13th Nov 20, 7:32am 1605205952

This may be a silly question but why would ASB jump in so early, and lose some customers to other banks?
Or, are they in fact feeling jumpy about the economy in general and so wanting to reduce risk (and look kind at the same time?). Why be first?

by RCD | 13th Nov 20, 7:40am 1605206421

Good PR, and probably not make the slightest difference to their bottom line

by Tom Foolery | 13th Nov 20, 9:08am 1605211699

I'd wager there is very little loss to ASB. This change they are pushing will only impact customers who are buying a rental property and the 10% difference to LVR would exclude them. Only a small number of customers who already have their current property portfolio with ASB are likely to switch banks over this, as most customers with home loans are fairly loyal. There are property investors who will move, but compared to their total lending portfolio, it will be minor. ASB are making the gamble that other banks will also follow suit, or that RBNZ will instate this measure in the future anyway.

Given the extremely high volumes of home lending/approvals recently, I'd also hazard a guess that ASB has a LOT of preapprovals in place, so they feel fairly comfortable in this slight restriction of additional lending.

by Millennial_Woman | 13th Nov 20, 11:29am 1605220190

They may have quantified some underlying risk to property investors that their competitors have not yet seen, and they are keen to divest from them before they tip over. By being first they may encourage those unwanted (risky) customers and go to their competitors while they are still on the good book.

by blobbles | 13th Nov 20, 8:54am 1605210842

Never thought I would see the day when the trading banks have to start pushing regulations the Reserve Bank should be imposing. This shows how absolutely out of control the RBNZ is, again the top management needs to be held to account for their atrocious decision and should resign or fired. This should be severely damaging for them as it makes a mockery of their "need to consult" bulls$%t which is clearly not needed while at the same time highlighting their horrific decision to remove the LVRs in March.

If ASB is setting LVRs at 30%, it probably means it should be a lot higher and/or other rules (like DTI's) should be there as well.

by philthy | 13th Nov 20, 3:06pm 1605233173

I'd have to agree ASB has done a brilliant job of showing how incompetent the RBNZ is.

The RBNZ should have been making the LVR for investors 30% or higher for investors months ago, once again they are asleep at the wheel.

by blobbles | 13th Nov 20, 3:59pm 1605236355

And now Westpac and ANZ have done the same. Wow RBNZ, that consultation period was definitely required huh?

by Jaf | 13th Nov 20, 9:14am 1605212050

LVR at 30 % may be ineffective if they allow the 30% deposit to come from some unrealised equity gain from another property. Just loading up the borrower with even greater debt . A more sensible move would be to couple LVR with DTI. But, that may not be resorted if the underlying aim is to keep the Ponzi alive!

by ACB | 18th Nov 20, 1:40pm 1605660059

Yes DTI's make a lot more sense than LVR's, the RBNZ has inexplicably ignored this option.