KEY POINTS:
New home buyers are facing high borrowing barriers despite falling interest rates as the credit crisis breaks loose on the nation's real economy.
The Commonwealth Bank of Australia became the latest of the primary Australian banks to announce the end of no-deposit home loans last week and Kiwi subsidiaries are following suit.
Chairman of the Mortgage Brokers Association Geoff Bawden says the most recent restrictions in the local market are ASB and Sovereign no longer providing zero-deposit home loans.
Other mainstream lenders have "very minimal" appetite for no-deposit lending, Bawden says, and applications for low-deposit lending are "looked at more critically than ever before".
ASB retail manager Ian Park says its policy of no zero-deposit home loans is due to lack of customer demand for them in a market where property
values continue to drop.
In the past three to six months most applicants have sought lending of 80 to 85 per cent of the value of a property, Park says.
Kiwibank offers 100 per cent home loans through the Government's Welcome
Home Loan scheme, whereby the Government guarantees the lending - and Kiwi- bank's Bruce Thompson says these loans have been "very
stable". Kiwibank's premium interest rates are only available on lending up to 80 per cent of a home's value. Above that, a borrower will pay an extra 0.2 per cent to cover the cost of mortgage insurance.
However Thompson says the bank will still consider providing 100 per cent loans to people outside of the Government scheme if applicants can present a
"very strong case".
Kiwibank pre- empted the widely expected official cash rate cut on December 4, last week lowering its variable interest rate to 7.95 per cent. It is offering a six-month fixed rate of 7.49 per cent; one year at 7.29 per cent
and two years at 7.59 per cent. These rates require a homeowner to have 20 per cent or more equity in the property.
Westpac also swung the axe last week, applying a 0.75 per cent reduction to floating home loan rates, most fixed home-loan rates, base business banking, and agri lending rates and credit card interest rates. ANZ and National banks then scrambled to cut their floating rates by 0.75 per cent at the end of the week.
Westpac spokesman Craig Dowling says as the credit environment has tightened over the past six months, the basis for approval of zero-deposit home loans has become much narrower. But getting such a loan is still possible if criteria are met - showing a greater capacity to repay so there is more room to cover adversity and having strong characteristics such as exemplary borrowing history.
BNZ spokesman Greg McNeill says the number of 100 per cent home loans on its books represents a "tiny" proportion of the bank's overall loan book.
First-time buyers typically require a minimum deposit of 20 per
cent. The maximum loan-to- value ratio for an owner-
occupied resi- dential property is 95 per cent and 90 per cent for invest- ment properties.
For customers with less than 20 per cent equity, BNZ uses a low-equity premium rather than loan mortgage insurance.
It is included as part of regular home-loan repayments.
