Westpac has announced an "innovative home loan option" that avoids first home buyers having to come up with a deposit of their own.
The bank will accept equity in the property of an immediate family member as the deposit needed for the loan.
No cash will be required upfront, Westpac says.
The new product is to be called "Family Springboard," and will be available from tomorrow, - Wednesday, July 31.
Westpac says the family members providing the loan support "can" be limited to the amount of the "Springboard" home loan.
“For a number of years now many New Zealanders have been focused on building equity rather than investing. This is a way they can leverage that equity to a level they are comfortable with and help their children or grandchildren into home ownership,” said Ian Blair, general manager of retail bank at Westpac.
“Family Springboard means family can help without having to hand over cash or lose interest on their savings. If the value of the property purchased increases sufficiently or the springboard part of the loan is repaid, the loan could be restructured to remove liability of the family member.”
“It shapes as a good option for first home buyers in particular,” Blair said.
Not an end-run around the RBNZ
Blair denied that the "Springboard" was intended to circumvent any impending Reserve Bank rules.
The Reserve Bank has said it's "seriously considering" using macro-prudential tools to help moderate house price inflation pressures, with restrictions on banks' high loan-to-value ratio (LVR) loans the tool with the best scope to dampen the current strong demand for housing, as well as reduce risk to bank balance sheets.
"It appears that we are going to have an environment where low-equity loans are going to be more difficult to get, and this helps address that issue," Blair said.
"The loan is de-risked by "Mum and Dad" putting up a portion of their equity to help get them into the house."
"That does not increase the risk in the financial system because the required equity for the loan is coming from another source," he added.
Other benefits
Springboard also provides the possibility of not having to incur additional cost in obtaining registered valuations when going to auctions and saves having to pay extra interest charged for low deposit home loans.
It follows the launch earlier this week of another new Westpac home loan product, Choices Offset. This provides customers the ability to use the balance of their eligible Westpac transaction and savings accounts to offset against their floating home loan and only pay interest on the difference.
Offset arrangements mean family members who contribute term deposit balances as part of the family support lose the interest on their investment. Springboard avoids that.
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.