The Reserve Bank's new restrictions on highly-leveraged home loans are likely to be a boon to non-bank lenders, which make up a fraction of all mortgages but aren't covered by lending curbs on banks.
The central bank expects a drop of up to 15 percent in the volume of home sales and reduce house price inflation by up to 5 percent when it introduces uniform restrictions on licensed banks' high loan-to-value ratio mortgages from September. The proposed changes would cap property investor loans with less than 40 percent as a deposit to just 5 percent of lending and restrict owner-occupiers with less than a fifth down to 10 percent.
Those restrictions would only apply to banks and two of New Zealand's larger non-bank lenders anticipate the move will give their businesses a boost in a market where they accounted for just 1.1 percent of $135.37 billion of long-term housing loans as at March 31, down from a peak of 8.7 percent of $97.33 billion of mortgages in December 2007.
Resimac Financial Services saw a lift in its loan book after the Reserve Bank first set restrictions on high LVR mortgage lending in late 2013, and New Zealand general manager Adrienne Church says the financier has the capacity to increase lending once again.
"People are seeing it as an opportunity in the market," Church said. "It's cyclical - it always is. That's why people came to market and why they left the market."
Resimac had $202.2 million of mortgages as at June 30, 2015, a level Church said they've maintained, although "there's definitely an opportunity to take that up a bit this year."
People are seeing it as an opportunity in the market. It's cyclical - it always is. That's why people came to market and why they left the market.Resimac NZ general manager Adrienne Church
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Liberty Financial, which owns the Mike Pero Group and also operates under its own banner, anticipates non-banks will see "significant growth" from the restrictions on licensed lenders.
Chief executive Mark Collins said his firm was already looking for strong expansion over the next two to three years before the announcement of the latest LVR restrictions, which he says will change the type of business they access.
"It certainly is going to increase the amount of business going through non-banks, that almost goes without saying," Colins said. "We're coming off a very low base, so we know even if the whole sector increases quite dramatically it's a very small amount of the market still."
Collins said the 60 percent cap for mortgages to property investors was a "very strong message" and he expects to see investors with multiple properties scale back their portfolios to better manage their interest repayments.
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The Reserve Bank is also looking at introducing debt-to-income lending restrictions, which Collins said would have a much bigger impact on the market because "that just breaks everybody".
Liberty and Mike Pero had $67.2 million of loans as at June 30, 2015, and Collins said the lender has had a strong year since then, growing its Auckland loan book 48 percent from a year ago, and posting even faster growth in Tauranga, Hamilton, and Christchurch.
The Reserve Bank's consultation paper on the changes said there was a risk the restrictions could stoke an increase in high-LVR lending not subject to the policy, which it said "would result in a decrease in financial system stability and efficiency as non-bank lenders would likely have more costly and less comprehensive processes for mortgage origination" and it will watch for signs "that an increased share of properties is being financed outside of the banking system."
Both Resimac's Church and Liberty's Collins said there was a limit to the level of highly leveraged mortgage lending they can write without adding too much risk to their loan portfolios.
Liberty falls under the Reserve Bank's oversight as a licensed non-bank deposit taker which means it isn't captured by the LVR restrictions. Resimac doesn't take deposits but says it tries to keep the central bank abreast of what it's doing.