Property investors get probing bank questions

RESIDENTIAL PROPERTY investors have become worried banks could start asking them to top up their loans, and there are signs it may be beginning.

One mortgage-broking source, who did not want to be named, told the Sunday Star-Times that ASB Bank had written to some investors asking for "statements of position" including up-to-date valuations.

The fear is that was a precursor to asking investors whose equity in their properties had fallen to reduce their borrowings, but ASB Bank said asking for such statements was nothing new.

In a statement, the bank said: "ASB has made no changes to its policy relating to `Residential Property Investors'. We have always reserved the right to request updated information which may take the form of an updated statement of position or in certain instances a registered valuation for securities."

But it added that investors who received such a request should not panic: "Where we do request updated valuations, it is not a pre-cursor that we want a borrower to top up the security for their loans or that we want them to sell a security and repay debt."

Empower Education's Peter Aranyi has long been predicting that banks will start asking property investors to top up their loans, as happened in previous market crashes.

In his 2005 Commercial Real Estate Investor's Guide, Aranyi wrote: "You may be quietly sleeping and suddenly get a call from the bank demanding a reduction in your borrowings with an immediate lump sum payment because the debt-to-equity ratios have changed.

"This seriously happens especially to highly geared borrowers. It doesn't matter that you've never missed a mortgage payment."

- © Fairfax NZ News