There are 2 new announcements today by BNZ & Westpac which I want to explain further in this week post. Both of them are key lenders and their decisions may impact the market.
BNZ announce with immediate effect that it will not lend more than 6 times the applicant income. This is known as DTI ratio (Debt To Income). It means for 2 professionals who are working with joint 130K income maximum debt (borrowing) could be 780K. If they want to buy 950K property which is normal entry property in Auckland now they need to have a 170K deposit. This is extra measurement and other previous rules and regulations for servicing or deposit remain in place. BNZ is the second bank to make this decision, ASB is doing this for a while. If other banks follow ASB and BNZ which usually will do, this reduces more buyer from the market and help market price increase slow down (property price will increase but with a slower rate. You can read details here.)
Westpac surprisingly increased its mortgage rate again. They have increased rates recently. Now the 1-year rate is 3.34% and 2 years 3.99%. I see some other bank 5-years rate above 5.24%. These rates are all higher than March 2020 which the Covid-19 pandemic started. Unfortunately, a higher rate may change people decision to buy a property and they give up short term. But no need to say in the long term rent will catch up with other things.
What is next?
- I am expected ANZ, Westpac, Kiwibank & TSB to apply similar DTI rules.
- Other banks will follow each other and expected rates go up to 4% range sooner than expected.
What you can do?
Plan proactively your property purchasing project, whatever banks do, you need to have plan B. Be ready for the next announcements. If you have a mortgage it is a good idea to look at your structure. If you don’t know how to start, contact me and I help you. Let’s forward this email If you know somebody who may be impacted by these new rules.