The $2500 hitch: ANZ reopens door to low deposit home loan borrowers

The country’s largest bank has reopened the door for low-deposit home loan approvals but there’s a big catch – they must have $2500 in spare income a month.

In November, ANZ NZ paused lending to those with deposits of less than 20 per cent wanting to buying existing properties.

The Reserve Bank tightened bank lending caps on November 1, meaning banks were only allowed to do 10 per cent of new loans to owner-occupiers with a low deposit.

ANZ this morning told mortgage brokers it was open for low-deposit loans again.

“We’re pleased to announce that effective immediately, we’ve reintroduced approvals for over 80 per cent LVR [loan to value ratio] lending that meet the criteria below.”

That criteria includes already being a main bank customer of ANZ and having a minimum uncommitted monthly income (UMI) of $2500. It is also only available on approvals, not pre-approvals.

Karen Tatterson, a mortgage broker with Loan Market, said ANZ did have an uncommitted monthly income surplus requirement in the past, which she believed was around $1000.

“So it is quite a big jump and it is going to be a big call. It is only people on really good incomes who are going to be able to qualify who have no discretionary spending.”

Tatterson said it was steep but she said the bank was in a position where they could dictate who and what they want to lend on.

She said Kiwibank last week opened the door to low-deposit lending.

“That was available for about 24 hours and then they pulled the pin because obviously the allocation has come in pretty quickly.”

Tatterson said Kiwibank had its standard policy around UMI and had not elevated it.

Tatterson said for ANZ it was not only the UMI but applicants had to be an existing customer of the bank and it was only for approvals.

“You have got to be live on contract for them to actually be able to do it.”

Tatterson said the income required to meet that UMI would depend on how much they were borrowing.

“It wouldn’t be a couple of people on a basic income. You would have to be semi-professional, have to obviously have no debt so the minute you start talking about student loans, credit card limits and car loans that is going to pull the UMI down.

“And the other key thing is they are going to have to be very tight around their discretionary spending. That is what throws people out, it is not the calculations, it is their discretionary spending which we have never had to detail in the past. Generally, those people on higher incomes tend to have a higher level of discretionary spending.”

That spending is under the spotlight due to a tightening of the Credit Contracts and Consumer Finance law which came into force on December 1.

The Government is undertaking a review of it after a number of complaints from the public and a petition signed by more than 10,000 people.

Tatterson said ANZ was the first of the big four banks to come back in offering to do low-deposit lending since they all withdrew it late last year.

She expected the other three to follow eventually.

“It’s all about them making sure they are meeting their requirements under the Reserve Bank restrictions.”

An ANZ spokeswoman said the pause on over 80 per cent LVR lending was always just a temporary measure which was necessary to help it meet the Reserve Bank’s tightened LVR measures.

“To help us manage the number of applications and approvals, and ensure we continue to meet the RBNZ requirements, we often make changes to the uncommitted monthly income requirements and borrowers may need to meet a higher threshold to qualify.”

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