From Banking Day:
Commonwealth Bank’s New Zealand subsidiary ASB has announced that customers with pre-approvals for high loan-to-valuation ratio mortgages must “use them or lose them” within 10 days, in its most drastic measure yet to slow lending to meet the Reserve Bank of New Zealand’s new “speed limit”.
ASB apologised to customers for withdrawing pre-approvals not used by October 4 and asked them to revisit the bank to either increase their deposit or look for a cheaper house.
The RBNZ’s limit on high LVR mortgages kicks in from October 1, but banks have large numbers of pre-approved mortgages that have yet to be drawn down or expire within six months of issue.
The RBNZ has given banks a six-month window from October 1 to reach the limit, which is that banks cannot lend more than 10 per cent of their new mortgage flow in the form of mortgages with LVRs of over 80 per cent.
ASB was more aggressive than other banks in this market segment and is too date the only one to pull in so hard. The RBNZ experiment can’t succeed soon enough.