Bank sites lift loan hopes

The ASB Bank has ordered improvements to its online mortgage calculator over concerns it gives customers unrealistic expectations of how much they can borrow.

The move comes after the Herald on Sunday discovered huge discrepancies in the maximum loan amounts indicated by the online tools.

Most major banks give people the quick and easy opportunity to find out possible loan limits based on household income and the number of people whose name the mortgage would be in.

But some say the calculators could give homebuyers false hope by returning unrealistically high loan amounts.

The Herald on Sunday used the example of a couple with a combined income of $100,000, no children and no debt. Results varied between $531,000 from the ASB and $615,000 from the National Bank, with the ANZ and Westpac between.

Neither the BNZ or Kiwibank offered would-be customers the chance to find out how much they could borrow. Instead, these banks indicated repayment levels based on a nominated loan amount and interest rate.

The results leave little room for manoeuvre.

Assuming the couple each earned $50,000 and made monthly repayments on the National Bank mortgage over 25 years with an average 7 per cent interest, they would be left with $553 a week after tax for all other bills and expenses.

Repaying the ASB mortgage at the same rate would leave our couple with $442 a week.

John Bolton, from Squirrel mortgage advisers, said most of the figures obtained by the Herald on Sunday appeared "too high" and borrowers wouldn't get them.

He said a couple with $100,000 income, no debt and no children, with a 20 per cent deposit, could take on a $500,000 mortgage "as a rule of thumb".

Bolton said he used more sophisticated calculators and the real figures available to our fictional couple would be between $465,000 and $531,000, taking into account their all-important expenses.

Bolton said credit markets were "changing all the time" but mortgage calculators were rarely updated and were not always accurate.

He believed they were useful, but the calculations made during interviews with banks were more sophisticated and accurate.

Massey University banking expert David Tripe said the calculators should always be treated "with a grain of salt" and were part of a marketing strategy to attract potential customers.

"They want people to go 'oh gosh, I could get that much money so I should go to that bank'.

"But when it comes to the crunch, it's just not that simple."

Banking Ombudsman Liz Brown said the calculators usually gave "an idea" for a loan amount, but were "not a firm offer".

Consumer New Zealand deputy chief executive David Naulls said they should require the deposit amount because banks generally lent only to customers with 20 per cent to put down.

He also said they should ask for as much detail as possible to give a more realistic outcome.

ASB spokesman Jonathan Symons agreed their calculator "could be better" and said the Herald on Sunday had "highlighted an issue we need to improve on". Its calculator does not require consumers to put in an expense amount, and Symons has instructed that it be updated and improved.

Westpac spokesman Craig Dowling said his bank's calculator was a guide only and the relevance of the output was determined by the detail and accuracy of information supplied.

The Herald on Sunday's couple could have borrowed $582,000 from Westpac based on 6.5 per cent interest, a deposit of almost $150,000 and monthly repayments of $3930.

Dowling recommended a direct conversation with the bank and said that was emphasised on the website. Any mortgage approval was subject to a full customer serviceability check.

The ANZ's calculator suggested a loan of up to $565,000.

A spokeswoman for both ANZ and National, Jessamy Malcolm Cowper, said their mortgage calculators required limited information and should be used as a guide only.

Customers had to meet their chosen bank to assess their unique financial position.