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New lending to take a hit if LVR introduced

New lending to take a hit if LVR introduced

(8 August 2013 – New Zealand)  New Zealand banks’ loan books are expected to take a massive hit as the Reserve Bank of New Zealand (RBNZ) is expected to introduce new loan-to-value ratio (LVR) requirements.

Described as house price “speed limits”, the new policy could more than halve the total amount of new LVR loans written by banks.

The new requirements could potentially wipe as much as NZ$2 billion (A$1.7 billion) from collective loan books within a year.

ASB head of retail banking Ian Park told Fairfax the debate so far had focused largely on first-home buyers, but it had broader implications.

"There is a concern from my perspective that the customer perspective has not had a good enough airing," he said.

He had identified the different types of lending by the bank and noted that a "significant chunk" of that lending was top-ups to existing customers for the likes of repairs and maintenance, or installing insulation.

"The customer has a leak in their house and they come to the banks and say they want two and a half grand to fix it," said Park. "Historically, no problem - we'll do that."

But if the bank prioritised top-ups over new lending, it risked spurning existing customers who had saved for years and wanted to buy a new home.

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