Real estate agents are working with second-tier lenders to organise finance for borrowers with small deposits amid fears of the house market seizing up once new lending restrictions are imposed.
Bankers and opponents of the restrictions on low-deposit loans, which will be enforced from Tuesday next week, have warned they could force borrowers with deposits of less than 20 per cent into the arms of loan sharks as banks shut them out of loans.
Professionals Lower Hutt owner John Ross said his firm is so concerned about the impact of the restrictions it is working with alternative lenders to help buyers into homes.
"We have gone straight to some lenders," he said.
"We need to have finance so we can keep selling houses. This is quite important to us so we are making arrangements with lenders to help our clients buy houses.
"Right in front of me I've got 10 solutions to help low deposit buyers to get into a home."
Ross, who said his firm was responsible for 40 per cent of the sales in Lower Hutt, said the biggest concern was people being put off looking for homes because they felt there was no way they could get the finance.
He planned to go over the options with staff today to see which they preferred though he would not disclose them, saying they were commercially sensitive.
"But hey, it doesn't take too many brains to actually see some of the options," he said.
Australian lenders coming into New Zealand fell outside the restrictions while non-trading banks were already here.
Second-tier lenders were being demonised but some were offering reasonable rates, Ross said.
He had found two with rates as low as 5.59 per cent variable or 5.35 per cent fixed for one year, he said.
ANZ, the country's biggest mortgage provider, charges a standard rate of 5.45 per cent fixed for one year, although it also imposes a one-off fee of 0.25 per cent of the value of the loan for borrowers who have almost 20 per cent deposit and 2 per cent for those who have less than 10 per cent.
"The thing we have to remember with these rates, it was only a few years ago, not many at all, when the rates were at 8.5 [per cent] so these are all extremely cheap rates," Ross said.
Because the second-tier lenders were not guaranteed by the Government - neither are banks - it did not undermine the Reserve Bank's aim of reducing the risk to the economy of a housing market crash by limiting the number of high loan-to-value ratio loans.
Remax Villa Real Estate sales manager Graham Barr, who covers the Tawa to Pukerua Bay area north of Wellington, said he was aware of Australian lenders moving into New Zealand to finance those who did not have sufficient deposits and rolling a "fat fee" into the loan.
"There does seem to be second-tier lenders out there ready to help," he said.
Finance Minister Bill English said the decision was up to buyers.
"We understand the strong drive of people to get into their first home and that they're going to look for other assistance if they can't get loans from the bank," English said.
"We would hope that over time as we increase the supply of houses, if we keep interest rates lower, then they will be able to get into their first home, wherever they get the money - we want to make housing more affordable."
Finance companies have already said they had seen a rise in non-bank lending.
New Zealand Bankers Association spokesman Kirk Hope said borrowers being forced into the unsecured lending market was always expected.
''That's exactly what happened in Canada for example where you saw fast growth in the non-bank lending portfolios.''
Hope said it was not necessarily about the quality of the lender ''it's just the fact that it's unsecured lending which sits outside the Reserve Bank's regulatory framework in most situations''.
''If your argument is that the LVR [loan-to-value-ratio) restrictions are contributing to financial stability, the counter-argument is that in practical terms they're not, because they're driving borrowers into unsecured lending markets which can't be healthy from a financial stability perspective.''
Consumer NZ financial writer Kate Sluka said second tier lenders such as credit unions, building societies and solicitor's nominees were safe options but warned people to due their due diligence first.
''People just need to take care with who it is that they are borrowing money from that they know just what that business is like - how safe, secure they are. They don't want to get caught up in any difficulties if that lender goes into its own financial problems.''
Buyers should check financial and credit ratings and get all the disclosure information they were entitled to under the Credit Contracts and Consumer Finance Act including things like whether the lender could raise interest rates suddenly.
She said potential borrowers were probably best to go through mortgage brokers who had more knowledge of lenders.
- © Fairfax NZ News