Experts: Banks more willing to lend on mortgages

Photo / Brett Phibbs

Would-be housebuyers struggling to scrape together a deposit for a new home have a glimmer of hope, as banks appear to be loosening the purse strings.

Massey University banking expert David Tripe said that, after 18 months of economic downturn, banks would be coming out of their shells lending wise, but "they won't necessarily rush out to advertise it".

"If there's good quality borrowers around, and good business opportunities, they will likely do the business."

Interest.co.nz editor Bernard Hickey also said banks had loosened lending criteria since a crackdown from early last year.

However, both men sounded a word of caution. Lending conditions were - and would remain - tougher than they were in 2007 when lending "exploded" in the lead up to the global financial crisis, Mr Hickey said.

"Before the crisis - 2007 - let's say most banks were lending 90 per cent plus. Now, most banks will only lend 80 per cent or less, although there are exceptions."

Many institutions had tightened their lending criteria in response to debacles such as the leaky buildings crisis, he said.

It meant most banks would not now loan money to anyone wanting to buy apartments or townhouses in the city.

Similarly, banks were reluctant to loan money to anyone who was buying property off plans, he said.

Dr Tripe said banks would be cautious about their lending as they would not want to be "deluged" with customers who were credit risks.

"People would be unwise to assume that they can get a loan without the necessary level of deposit. Some people may be able to, but it will be by no means universal."

All banks contacted by the Herald yesterday said they encouraged homeowners to save a 20 per cent deposit but all cases were treated individually and if homeowners had a steady, secure income, some could loan up to 100 per cent.

With floating mortgage rates coming off 40-year lows, Kiwi homeowners are starting to move away from the traditional two-year fixed term mortgage, with 30 per cent of the country's home loans now on floating rates - triple the rate seen three years ago.

Mr Hickey said the move to floating rates was a good one for consumers. "It means that people can repay debt faster ... in the long run you're probably better off."

However, he warned that homeowners opting for floating rates were at the mercy of Reserve Bank governor Dr Alan Bollard.