KiwiBank halts low equity lending

Kiwibank. Photo / Dean Purcell

Kiwibank has halted lending to low equity mortgage borrowers after getting too close to restrictions imposed by the Reserve Bank.

Loan-to-value ratios (LVRs) introduced by the central bank in October 2013 mean lenders must limit new loans to borrowers with less than 20 per cent equity to no more than 10 per cent of the total value of their loan books.

Kiwibank spokesman Bruce Thompson said the bank had stopped its low equity lending last week after nearing its own, self-imposed limit.

"As a consequence we've backed off from any lending with less than 20 per cent deposit until we get the book back into balance," Thompson said. "That will allow us to resume lending for low equity."

In the meantime, he said Kiwibank was looking to grow its overall loan book through competitive interest rates.

"As the overall book grows, then we can of course resume the lending for low equity," Thompson said. "Hopefully that won't take terribly long."

He declined to disclose Kiwibank's self-imposed limit on low equity lending, saying it was commercially sensitive.

Pre-approved loans to borrowers with small deposits would still go ahead, Thompson said.

The LVRs were introduced with the aim of cooling down a surging property market, particularly in Auckland.