ASB says customers with approval for low equity home loans have until Oct 4 to draw them down

ASB says customers who have received pre-approval for low equity home loans have until October 4 to draw them down.

"We are withdrawing all outstanding above 80% LVR (loan-to-value ratio) pre-approved loan offers with effect from 4 October 2013 in order to comply with the lending restrictions being implemented by the RBNZ," an ASB spokesman told interest.co.nz.

From October 1 all banks must restrict new residential mortgage lending at LVRs of over 80% to no more than 10% of the dollar value of their new housing lending flows. Allowing for exemptions the Reserve Bank estimates this 10% "speed limit" will effectively limit the banks’ high-LVR lending flows to about 15% of their new residential lending, versus the estimated 30% they've been doing in recent months.

Banks do, however, have six months to phase in the new restrictions meaning the first test of the LVR restrictions will effectively come at the end of March next year. The six month phase in is to help banks accommodate pre-approvals with the Reserve Bank saying some banks had pre-approved so many high LVR mortgages they would have breached any limits placed on high LVR lending straight away without a six month lead in.

Asked by interest.co.nz in August whether this had been a concern for ASB, CEO Barbara Chapman said it was a concern because the bank often didn't know exactly when pre-approved loans would be drawn.

The latest round of bank general disclosure statements showed, of the major banks, ASB comfortably had the highest quarterly net growth in high LVR lending at 73% of its overall quarterly home loan growth. For the June quarter Chapman estimated just over 20% of ASB's new residential mortgage lending came from high LVR lending.

What are the other major banks doing?

Interest.co.nz also asked the other major banks whether they will also cut off pre-approved high LVR loans at a specified date.

An ANZ spokesman said: "We continue to honour our existing mortgage pre-approvals and customer commitments. We also continue to consider new mortgage applications over 80% LVR within the new RBNZ limits and encourage people to talk to us about their individual circumstances and needs."

A Westpac spokeswoman said: "We are continuously monitoring and assessing the situation and will do what is required to comply with the Reserve Bank rules coming into effect on October 1."

A BNZ spokeswoman said: "Based on our current flows and historic conversion rates, we expect to be able to continue honouring existing pre-approvals. We encourage any customers with questions or concerns about their pre-approval to contact us for advice."

And a Kiwibank spokesman said: "Currently we do not have any plans to set a time limit for pre-approvals and we continue to prioritise first home buyers."

Meanwhile, the New Zealand Bankers' Association said the Reserve Bank had shifted the goal posts.

"Don’t take anything for granted. If you have any concerns about a pre-approval, we suggest you contact your bank and talk it through," the NZBA said.