BNZ latest bank to ban foreign home buyers
BNZ is the latest bank to stop lending home loans to foreign buyers, while also introducing tough new restrictions on Kiwi borrowers living overseas.
Westpac and ANZ both announced on Thursday that they would stop issuing home loans to foreign buyers.
BNZ said it would not loan to people with foreign income who were not New Zealand or Australian citizens or did not hold a current permanent residency visa, regardless of whether or not they reside in New Zealand.
A BNZ spokeswoman said a maximum allowable loan to value ratio (LVR) of 60 per cent would also be required of New Zealand and Australian citizens and permanent residency holders who used foreign income to service a loan but did not reside in New Zealand.
A loan-to-value ratio is a measure of how much a bank lends compared to the value of a property.
Customers in this category would also have a 40 per cent "shade" applied to the value of their income earned overseas.
This means if a customer is a New Zealand or Australian citizen who is living overseas and earning income overseas, only 60 per cent of that income would be taken into account when the bank considered their ability to service a new home loan in New Zealand.
A Westpac spokeswoman said on Thursday the bank would no longer lend to non-resident borrowers with overseas income.
Borrowers on temporary resident visas would only be accepted if they had both a New Zealand address and New Zealand based income.
Westpac reduced the maximum allowable LVR from 85 to 70 per cent for New Zealand citizens and permanent residents with overseas income.
Westpac also stopped making its special home loan rates available for business or investment purposes.
An ANZ spokesman said it was also restricting home loans to foreign buyers that relied on overseas income.
ANZ's home loan restrictions to foreign buyers include a maximum LVR requirement of 70 per cent, restricting loans to owner occupied properties and banning boarder income, interest only lending and ANZ Flexible Home Loan availability.
It would also stop issuing loans for the purchase of bare land or construction to foreign buyers and would only lend to individuals.
New Zealand passport holders living overseas purchasing a property funded by overseas income were exempt from the restrictions.
ASB is the only bank of the big four to have not made lending changes for foreign buyers, but said on Friday that its credit criteria were constantly under review.
Kiwibank spokesman Bruce Thompson said foreign borrowers were not a big market for the state-owned bank so it was not changing any policies yet, however, it would consider lending restrictions as circumstances changed.
Massey University director of banking studies David Tripe said there were several reasons why banks were tightening overseas lending.
Firstly, the Australian banking regulator, Australian Prudential Regulation Authority (APRA), had cracked down on banks exposures to investor lending, foreign buyers and credit quality.
That message was probably flowing through to the banks' New Zealand subsidiaries, he said.
APRA was also forcing the Australian banks to reduce exposure to their New Zealand subsidiaries, causing them to identify what the riskiest loans in their portfolios were relative to the returns they were getting.
"Some of this foreign lending is in the higher risk category," Tripe said.
There were concerns that people using overseas income to service debt would walk away from their loans if there was a housing market crash, he said.
"It's an easier choice for them to make. It's often quite hard to litigate across international borders."
Another factor that could be influencing the banks was the Reserve Bank making noise about introducing more restrictions. Banks would be wanting to appear as though they were taking measures to reduce risky lending, he said.
Without knowing the loan portfolios of the banks it was difficult to make an assessment of the consequences of the changes.
"We don't know how serious the problem of foreign buyers really is."
The changes would have only a small impact on New Zealanders looking to buy homes, he said.
In May data collected by Land Information New Zealand showed just 3 per cent of homes were sold to overseas residents in the first three months of 2016.