Bank of New Zealand chief executive Andrew Thorburn says he's comfortable with the level of low equity home loans the lender is writing, though he is still wary of funding new property developments.
About 15 per cent of the Auckland-based lender's mortgage book is at a high loan-to-value ratio of 80 per cent or above, the lowest among all of the major banks which are about 20 per cent, Thorburn told BusinessDesk. BNZ charges a low equity premium of 0.4 to 0.5 percentage point premium on loans with an LVR above 85 per cent as a means to mitigate its risk.
"We're doing things sensibly," Thorburn said. "When you look at the quality of our housing book, it's a high asset quality, it's very strong."
The Reserve Bank yesterday raised concerns about New Zealand's bubbling property market and the risk it poses to the financial system if it gets too far out of check.
Chief among those concerns was the increase in low equity lending by the banks, which accounted for almost a third of new mortgages, and it announced plans to increase the amount of capital local banks will have to hold to back mortgage lending. It's also preparing to introduce macro-prudential tools, which include potential restrictions on high LVR lending.
