ASB cancels pre-approved loans

MARTA STEEMAN
Last updated 14:53 23/09/2013

Relevant offers

Money

Cecile Meier: A week without spending When floating ends in sinking Consumers under the pump if dollar keeps falling Credit information fee capped at $10 Guilty plea in advertising scam case Another bank follows suit on rates Bank turns sights to kiwi Low deposit home loans nudge higher ACC levy cut plan benefits drivers Interest rates lifted by Reserve Bank

ASB Bank has apologised to disappointed customers after cancelling all its low-equity mortgage pre-approvals.

The bank sent a note to brokers this morning, advising them that those hoping to borrow with a deposit of less than 20 per cent would have pre-approvals withdrawn on October 4.

It refused to say how many pre-approved loans and people were affected, citing commercial sensitivity.

ASB's general manager product and strategy Shaun Drylie said the new Reserve Bank restrictions were to blame.

From October 1, all banks will only be allowed to lend 10 per cent of their new loans to borrowers with deposits of less than 20 per cent.

"ASB, like all New Zealand banks, has to comply with these restrictions under our conditions of registration," said Drylie.

"We appreciate that this will be disappointing for customers who are impacted and we apologise for any inconvenience caused."

Drylie encouraged affected customers to contact the bank to discuss their individual circumstances and get assistance with a new loan offer.

That might involve rethinking the size of their deposit, or the value of the property they wanted to buy.

The bank said it would contact affected customers directly over the next few days.

ASB has lent the most aggressively into the high loan-to-value ratio sector recently, which is the area the central bank wants to restrain.

Other banks have been contacted to see if they are also considering a clean slate approach.

"Based on our current flows and historic conversion rates, we expect to be able to continue honouring existing pre-approvals," a BNZ spokeswoman said.

"We encourage any customers with questions or concerns about their pre-approval to contact us for advice."

Christchurch broker Lachie Marshall said the Reserve Bank's loan restriction would not work in dampening house price increases.

Marshall said first-home buyers were not to blame for the rising prices. He did not know how many pre-approved loans were affected nationally or in Christchurch.

"Christchurch-wise I'd say a significant number," he said.

Marshall said the Reserve Bank did not understand how the home-lending market worked.

"If this is designed to slow house prices it simply won't work," he said.

"It means poor first home buyers aren't in the marketplace without mum and dad's help."

Ad Feedback

- BusinessDay.co.nz

Comments

Special offers

Featured Promotions

Sponsored Content