ANZ “pauses” low-equity lending

Australian-owned ANZ has temporarily put on hold the issuance of new home loans to people with deposits less than 20%.

It’s not the first time ANZ has announced a low-equity lending pause, having done so in November before resuming low-equity lending in February. Two other banks also went on a temporary low-deposit lending pause – BNZ earlier this year and Kiwibank last year.

An ANZ spokeswoman said the move was to ensure the bank remained within the low-equity lending cap set by the Reserve Bank, which limits banks to lending only 10% of new home loans to people with less than 20% equity, Stuff reported.

In a message to mortgage advisers, ANZ said the move would enable the bank to meet RBNZ’s tightened loan-to-valuation requirements, which cap the amount of low deposit lending to 10% of all new loans to owner-occupiers.

Some loans were exempted from the rules, including borrowing to build a new home – an exemption designed to boost home-building.

Mortgage adviser Karen Tatterson from Loan Market said banks nowadays tend to use a “traffic light” system to inform mortgage advisers when they were making loans to low-deposit borrowers, and when they were not, with ANZ’s pause was the first one in recent times.

Declining house prices have put a dampener on home buying, making buyers nervous about negative equity, and whether the home they’ll purchase could quickly be worth less than they paid for it.

Just last week, CoreLogic said house prices dropped in half of the country’s suburbs over the last three months, providing proof the market downturn was spreading. The property research company’s latest mapping analysis showed prices fell 1% or more in 323 suburbs, and by less than 1% in another 163 suburbs.

“Customers with existing approvals are unaffected until the expiry date, at which point we’ll need to apply the updated policy,” an ANZ spokeswoman told Stuff.