Property investors restrained

Massey University banking expert David Tripe said there was potential for New Zealand banks to introduce higher borrowing rates for property investors. Photo / Supplied

Aussie banks raise interest rates in bid to cool boom as Sydney median price breaks through A$1m.

Two major Australian banks have lifted interest rates for property investors in a bid to cool the country's property boom, but their New Zealand subsidiaries do not appear to have any plans to make similar moves to combat rocketing house prices on this side of the Tasman.

The rate hikes followed warnings from Australian banking regulators that tighter mortgage standards were required to prevent a Sydney housing bubble causing financial havoc, Reuters reported.

This week, median house prices in Australia's biggest city broke through the million-dollar mark, hitting A$1,000,616 ($1,108,313).

The Australian Prudential Regulatory Authority said on Monday banks should have capital reserves equal to 25 per cent of their mortgage lending, up from 16 per cent.

From next week, ANZ's variable residential investment property loan index rate in Australia will lift 0.27 percentage points to 5.65 per cent, while fixed rates for new investor home loans will increase by up to 0.30 percentage points.

Commonwealth Bank of Australia, the parent of New Zealand's ASB, announced a similar rate hike for investors yesterday.

ASB head of home lending Vince Clark said the bank was aware of the Australian developments and its interest rates were subject to regular review.

"The RBNZ [Reserve Bank] has issued proposals in regard to investor lending and we will evaluate the final outcomes in due course," Clark said.

An ANZ spokesman said New Zealand was a very different market to Australia, with the Reserve Bank having actively used a range of macro-prudential tools, such as loan-to-value ratios, to keep the housing market within "desired parameters".

"We have ongoing discussions with the Reserve Bank about the home loan market and how best to maintain stability for the good of home buyers and the economy."

There has been talk this year of the Reserve Bank introducing changes aimed at making loans more expensive and harder to obtain for property investors.

In March it announced new limits on lending to property investors in the Auckland Council area.

Those borrowers will be required to have a deposit of at least 30 per cent from October 1.

Loan-to-value ratios on mortgage lending were first introduced in October 2013.

Experts have predicted that the median Auckland house price could reach $1 million (up from around $750,000 currently) in 18 months' time if interest rates keep falling.

Most New Zealand banks cut their floating mortgage rates this week after the Reserve Bank cut the official cash rate by 25 basis points to 3 per cent on Thursday, while many fixed rates have now dipped below 5 per cent.

Massey University banking expert David Tripe said there was potential for New Zealand banks to introduce higher borrowing rates for property investors.

"Don't assume it's not coming," Tripe said.

"The other thing is, if that [regulatory] pressure is being put on the banks in Australia, they'll also be looking at their New Zealand subsidiaries on that basis."

Westpac said this month that in Australia it would limit new loans to 80 per cent of the value of homes being bought by property investors, down from 95 per cent previously.

CBA has also said it would enforce a minimum interest-rate "floor" of 7.25 per cent in assessing borrowers' ability to pay back loans.