New buyers hit as Kiwibank halts low-deposit loans

Kiwibank yesterday said it was turning off the tap for the low deposit advances because it was getting too close to the Reserve Bank restrictions.

Home buyers seeking low-deposit mortgages could find it even tougher to secure funds after Kiwibank said it was suspending new loans.

The bank yesterday said it was turning off the tap for the low deposit advances because it was getting too close to the Reserve Bank restrictions.

Loan to Value Ratio (LVR) restrictions were introduced in October last year. The rules stated that mortgages approved with less than 20 per cent deposit had to be less than 10 per cent of a bank's new lending.

Kiwibank spokesman Bruce Thompson said the bank was nearing its own self-imposed limits that prevented it breaching the Reserve Bank rules. "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."

Mr Thompson declined to disclose Kiwibank's self-imposed limit because it was commercially sensitive, but said pre-approved loans would still go ahead.

In the meantime, the bank hoped to be able to grow its overall loan book through competitive interest rates, so it could offer the lending services again soon.

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

Loan Market mortgage adviser Bruce Patton said first-time home buyers would again lose out as the pool of possible funds continued to narrow. "The biggest impact will be around first-home buyers. That's the poor person that keeps getting kicked in the guts whenever anything like this happens."

Mr Patton said the effects would be more widely felt at the moment because people tended to seek more finance coming into summer.

Of all the other major banks surveyed by the Herald yesterday, only Westpac, BNZ and ANZ responded.

All said they were still issuing loans to customers with less than 20 per cent deposits.

An ANZ spokesman said: "We kept our doors open once the LVR speed limits were introduced. We've honoured all of our pre-approvals and kept approving loans for customers, even if they haven't quite met their savings goals yet."

A BNZ spokeswoman said the bank was "absolutely" still offering high-LVR loans and first-time home buyers made up 30 per cent of those customers.