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ASB Bank has "let down" customers by cancelling home loan approvals as a result of new Reserve Bank lending restrictions in spite of having months to prepare, Finance Minister Bill English says.
ASB yesterday confirmed it was withdrawing all outstanding pre-approved loan offers for borrowers with less than 20 per cent equity to meet the new lending rules.
From October 1 banks must cap new lending above the 80 per cent threshold to 10 per cent or face losing their licence from the Reserve Bank.
This morning English said the Reserve Bank was talking about the policy earlier this year. "It looks like ASB weren't really listening they seem to be the only bank that's got themselves in that position".
"Six months ago the Reserve Bank Governor was talking about bringing restrictions on low deposit loans and this seems to be the only bank that's got themselves in a position where they're letting down people who they gave approvals to."
English said he didn't expect other banks to follow suit, " because they simply haven't indicated they'll do the same thing".
He acknowledged the new restrictions were "a bit tough on first home buyers in the short term" but over the longer term they would benefit from lower interest rates and the Government's policies to increase the supply of new houses.
Labour Leader David Cunliffe said he understood ASB had quite a high proportion of low equity loans on its books but " that doesn't take way from the fact the Government has got this wrong".
"They obviously have not co-ordinated with the Reserve Bank we've got a very bad policy as a result."
Cunliffe said Labour's policy was to temporarily exempt first home buyers from the Reserve Bank's high Loan to Value Ratio lending limits, and he indicated that could be achieved following changes to the Reserve Bank Act to change the relationship between the Government and the bank.
"We've already said that we're going to be amending the Reserve Bank Act, yes we'd want to have a look at that boundary."
ASB's general manager product and strategy Shaun Drylie yesterday said the bank was encouraging affected customers to contact it to discuss their circumstances and how it might be able to assist them with a new pre-approved loan offer."This may involve reviewing the amount of their current deposit and also the value of the property they are looking to purchase.
"We appreciate that this will be disappointing for customers who are impacted and we apologise for any inconvenience caused," he said.
An ANZ spokesman said it continued to honour existing mortgage pre-approvals and customer commitments. "We also continue to consider new mortgage applications over 80 per cent loan-to-value ratio within the new Reserve Bank of New Zealand limits and encourage people to talk to us about their individual circumstances and needs."
BNZ said it also saw no change. "Based on our current flows and historic conversion rates, we expect to be able to continue honouring existing pre-approvals," a spokeswoman said.
Westpac said it was continuously monitoring and assessing things and would "do what is required to comply with the Reserve Bank rules coming into effect on October 1".