ASB pulls low deposit loan offers

ASB Bank has cancelled mortgage pre-approvals for home loans with less than 20pc deposit. Photo / NZ Herald

ASB Bank has cancelled all pre-approvals for home loans over the 80 per cent loan to value ratio with effect from October 4.

A spokesman for the bank said it had been telling customers and mortgages brokers about the change over the last few days.

The change comes ahead of the Reserve Bank's crack down on low equity or low deposit lending. From October 1 banks must cap new lending above the 80 per cent threshold to 10 per cent or face losing their license.

Shaun Drylie, general manager, product and strategy at the ASB Bank said the change was being implemented to comply with the new lending restrictions.

"ASB, like all New Zealand banks, has to comply with these restrictions under our conditions of registration."

Drylie said the bank was encouraging affected customers to contact it to discuss their individual 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."

Squirrel Mortgage Brokers' chief executive John Bolton told the Herald last week his company was "definitely" seeing banks tightening up on lending.

"Banks started tightening up in the last three or four weeks since the Reserve Bank's change," he said.

The early clampdown was affecting his clients, some of whom had pre-approval for loans with deposits of just 10 per cent.

He had been fielding concerns from clients who were worried it would lapse before they found a suitable property.

New Zealand Bankers Association chief executive Kirk Hope said last week it would be no surprise if banks were making changes before the month's end as they got their heads around the new changes.

Hope said customers should speak to their banks about any concerns, and read the terms and conditions of any pre-approved low deposit loans carefully.