What are you seeing with the bank financing environment?

[Chris W]

Do you think that this will flow on to the NZ ones owned by Aussie banks?

No idea. Best for you to talk to your mortgage broker.

[brokerman]

I'm told the assessment is currently 7.5%, and P&I on an 18 year payback.

with the main banks this is about right. Two non banks will go off of what is actually being paid though and one at 80% standalone investment 5.09% fix two years. more than the banks yes but at 80% is hard to beat.

[Chris W]

Two non banks will go off of what is actually being paid though and one at 80% standalone investment 5.09% fix two years. more than the banks yes but at 80% is hard to beat.

Brokerman,

1) do the non banks add an interest buffer at all? if so, what level is it? 2%? 2.5%?
2) if they do, what rate do they apply it to? - (e.g to the interest rate actually being paid? or some other rate?)

[brokerman]

Brokerman,

1) do the non banks add an interest buffer at all? if so, what level is it? 2%? 2.5%?
2) if they do, what rate do they apply it to? - (e.g to the interest rate actually being paid? or some other rate?)

A couple add a margin similar to the banks and one stresses at current floating rate and one at the current pay rate.

[mudbomber]

I've had 4 offers in and agents telling me their building in 15 days finance as the banks are taking a very long time... I have an offer now but the conditions are impossible. Get a Auckland council CoA for a bathroom in 5 days... hahaha laughable.

[Chris W]

A couple add a margin similar to the banks and one stresses at current floating rate and one at the current pay rate.

Brokerman,

So if loan applicants meet this debt servicing criteria, how long can they go on interest only terms with non banks? 5yrs? 10yrs?

Also, how much do the non banks discount gross rentals for property investors? With the main banks, I heard it is about 20%.

[Chris W]

FYI, just heard that one of the big 4 banks reduced their stress test rate by 0.5% yesterday.

[Chris W]

FYI, heard that another 2 of the big 4 banks also reduced their stress test rates.

[Beano]

It would be nice to have a "spy" within the bank credit department on this forum
So many things we do not know :-)

[Chris W]

So many things we do not know

You should ask them on this thread. Someone may be able to answer your question.

[Chris W]

FYI

Wednesday 9 October 2019
Banks have made adjustments to serviceability tests since the Official Cash Rate cut in August, but advisers doubt whether the changes will have a big impact on pass rates.
ANZ cut its servicing sensitivity rate from 7.25% to 6.9% in late August. In a note to advisers, the bank said it had listened to "survey feedback".
ANZ has also separated its loan affordability calculator, making it a standalone form.
The change comes after the Reserve Bank cut the OCR by 0.5% in August, prompting home loan rates to fall to record lows.
Regulatory changes have also made it easier for banks to ease servicing rates. Australian regulator APRA abolished its minimum 7% testing rate for banks in August.


An ANZ spokeswoman said: "We review our servicing sensitivity rate (SSR) on a regular basis. We reduced our SSR following August’s Official Cash Rate (OCR), cut taking into account falling interest rates, the long-term OCR outlook and recent APRA requirements."
Meanwhile, ASB has changed the interest rate used to determine loan servicing of uncommitted monthly income from 7.7% to 7.2%. The bank said it had "listened to feedback" from advisers.


Stephen Wilton, an adviser at The Advice Group, says the changes have had a slight impact on pass rates for borrowers, but says allowances still make it tight for borrowers.
"For the most part, standard mum, dad, two kids deals are pretty much of a muchness over all banks ... It does seem like a lot of deals are looking much better in terms of a pass rate, although when it comes to investors (calculated on P & I), there's still a bit of a battle."
Glen McLeod of Edge Mortgages said bank serviceability rates still hovered around the 7% mark. He doubts whether serviceability rates will fall much further in the near term: "If you look where we are, that's almost double [compared to current home loan rates]. If you look at the Responsible Lending Code, do banks have much choice?"

https://www.landlords.co.nz/article/976515716/servicing-test-changes-limited

[Chris W]

Banks have cut the interest rates they use to test mortgage borrowers' ongoing ability to service their loans by a similar amount to what mortgage rates have fallen by over the past year.
ANZ New Zealand, the country's biggest mortgage lender with almost $85 billion worth of loans at September 30, currently uses a servicing sensitivity rate of 6.65% per annum. Testing serviceability is calculating whether a borrower can afford the repayments on a loan after their other expenses and income are taken into account.
Just over a year ago banks were testing borrowers' ability to service their loans at rates around 7.50%. With other banks now at similar levels to ANZ, mortgage brokers say this has boosted borrowing capacity, in some cases potentially by $70,000 to $90,000. The key reasons for the drop this year are changes made by the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of New Zealand (RBNZ).
In July APRA announced changes to its guidance on the serviceability assessments Aussie banks use on residential mortgage applications. No longer does APRA expect them to assess home loan applications using a minimum interest rate of at least 7%, which had established common industry practice at 7.25%. Since July Aussie lenders have been allowed to review and set their own minimum interest rate floor for use in serviceability assessments and utilise a revised interest rate buffer of at least 2.5% over the loan’s interest rate.
APRA's change was attributed to a lower interest rate world and the widespread use of differential pricing for different types of loans challenging the merit of a uniform interest rate floor across all mortgage products. Mortgage brokers say APRA's move flowed through to NZ's Australian owned banks, ANZ, ASB, BNZ and Westpac, this country's four biggest mortgage lenders.

https://www.interest.co.nz/personal-finance/103022/banks-have-reduced-interest-rates-they-use-test-mortgage-borrowers-ability

[MS1353]

Hi, Anybody knows the rules about revolving credit with each bank? I heard TSB give only 20% of your mortgage as revovling credit, ANZ give 350K if your LVR is 70% or less. what about ASB, Westpac, BNZ and Kiwi bank?

[Chris W]

Heard that if borrowers have an existing loan and wish to apply for an additional loan, then banks are using the stress rates on the remaining loan term in their debt servicing calculations.

[brokerman]

Heard that if borrowers have an existing loan and wish to apply for an additional loan, then banks are using the stress rates on the remaining loan term in their debt servicing calculations.

Correct, most lenders do this even if the existing lending is on interest only the bank will use 25 year P&I and stress at their rate. They do vary from 6.5% to 7.25%. A couple of non banks look at 6% and one uses the actual payment. Hope that helps