Westpac cuts pre-okayed mortgages

The spokesman confirmed that in some instances customers may be told the bank could not continue pre-approvals under the existing terms. Photo / NZPA

Westpac has confirmed it is withdrawing mortgage pre-approvals for some customers following the introduction of the Reserve Bank's new lending restrictions, which real estate agents say are driving first home buyers from the market.

The new rules limiting the amount of loans banks can make to home buyers with deposits of less than 20 per cent took effect two weeks ago. That prompted a widespread cancellation of mortgage pre-approvals by ASB Bank for would-be buyers with low deposits.

A Westpac spokesman yesterday told the Herald it was now contacting customers with pre-approvals "to ensure they have up to date interest rate and lending criteria information after recent market changes made in response to new Reserve Bank regulations on high LVR ratios".

The spokesman confirmed that in some instances customers may be told the bank could not continue pre-approvals under the existing terms.

However "before we get to that there is a whole raft of products that we would look at to try and help them".

Meanwhile, a survey of 420 real estate agents by the Real Estate Institute (REINZ) suggests the new rules are hitting first home buyers hard already.

A net 41 per cent of those surveyed noticed fewer first home buyers so far this month, a sharp turnaround from September when a net 24 per cent of agents noticed more first home buyers.

"This is the weakest and only negative result since our survey started in April 2011," BNZ chief economist Tony Alexander said.

However Mr Alexander did not expect the perceived lack of interest by first home buyers to persist.

First home buyers were likely to be back in greater numbers once they got used to the new rules, as more qualified for the new minimum deposit rules, as more found alternative finance, and as some shifted their purchasing focus to parts of New Zealand other than Christchurch and Auckland.

Labour's housing spokesman Phil Twyford said the survey results offered the first clear evidence that the Reserve Bank's loan to value lending limits, which imposed a 20 per cent minimum deposit requirement for many lenders were beginning to bite.

Ripple effect

The BNZ-Reinz Residential Market Survey of 420 real estate agents (net figures)
*41% said there were fewer first home buyers in the market in early October.
*6% said there were more investors in the market.
*16% said there were fewer people going to open homes.
*41% expected house prices to keep rising.