Banks open doors to home-loan borrowers with low deposits

Mortgage brokers are pointing to early signs of the major banks opening the door to more low-deposit borrowers in the wake of an easing in home-loan restrictions.

On January 1 the Reserve Bank increased the cap on banks from 10 per cent to 15 per cent of lending to home buyers with a deposit of less than 20 per cent.

Investors also received a slight reprieve with the equity requirements reducing from 40 per cent to 35 per cent with 5 per cent of lending to investors allowed outside of that.

John Bolton, managing director of Squirrel Mortgages, said he had noticed two big changes since the lending restrictions on the banks were eased.

"One - everyone is open. Last year for periods it was just really hard to do anything."

Last year brokers reported having to go from bank to bank to see who had the capacity to lend with it changing on a weekly basis depending on what lending they had approved.

Bolton said the cap increase from 10 to 15 per cent was not huge but it did alleviate capacity issues.

Bruce Patten, a mortgage broker with Loan Market, said all the major banks appeared to be loosening up their lending.

He said Westpac had been out of the over 80 per cent lending market and believed they were set to come back in at 90 per cent.

"ANZ has also moved to 90 per cent and so has Kiwibank (who were both at 85 per cent max lend pre-xmas). So plenty happening, which is good."

Bolton said the second change he had noticed was an increase in interest from first-home buyers.

"There is a lot of enquiry around at the moment. We are looking at a lot of applications in that over 80 per cent space."

Karen Tatterson, another broker with Loan Market, said she too had seen a boost in enquiries from first-home buyers.

"There's been a slight increase in enquiries from first home-buyers because obviously it affects them a lot."

Tatterson said she hoped the change would help more first-time buyers get over the line.

"I would like to see more first-home buyers coming into the market - those are the people missing out."

But she said the biggest issue was not the loan-to-value ratios but the affordability of property with prices remaining at elevated levels.

"As the market slows and cools ... we may see more and more first-home buyers coming into the market."

Mortgage brokers say banks seem to be more open to low deposit home loan borrowers. Picture / Brett Phibbs
Mortgage brokers say banks seem to be more open to low deposit home loan borrowers. Picture / Brett Phibbs
Tatterson said she was seeing first-home buyers with good savings and a decent amount in their KiwiSaver accounts but the challenge was finding a property where they could service the mortgage.

Bolton said even with a relaxation of the rules not all borrowers would get over the line.

"It is still tough," he said. "Bank criteria's are still tougher than in the past."

Banks still wanted to see a decent surplus after expenses were taken into account for those borrowing more than 80 per cent and that was hard, especially in Auckland.

"Banks are more available than they were, if quality business is coming through we are going to get it approved."

However, he said there were still challenges for those who did not have a decent deposit, did not have a savings history and for whom servicing would be tight.

Typically the banks were lending five times a person's income but for those wanting to borrow 80 per cent it was more like 4.5 times, he said.

"There is a lot more first-home buyers out there. They are aware of the changes. Banks are open for business but the credit rules haven't changed and they still are a little bit on the hard side."