borrow as much money as they had previously expected. In a note sent to mortgage brokers, the state-owned financial service provider noted that any preapproval applications for over 80 per cent of the purchase price of a property will not be accepted, although this will not apply to those exempted from the Reserve Bank’s loan-to-value (LVR) rules, such as new builds.
Moreover, the bank said the new guidelines will not apply to deals for preapprovals for tenders and auctions on a specific property that has already been accepted by the bank, unless then offer was made or accepted after last Friday evening.
“Existing approved preapprovals where there has been no specific property as part of the approval will now be limited to a maximum of 80 per cent LVR. We will provide you with a list of these customers to confirm if the application will need to be cancelled,” the note read. “If you sent in a sale and purchase agreement after 5pm Friday November 12 we will not be able to proceed with that approval or property where more than 80 per cent lending is applied.”
However, according to several mortgage brokers, the new guidelines announced by Kiwibank are unusual, since it is different from other lenders who are not offering preapprovals for people who were not already bank customers. “Kiwibank is withdrawing preapprovals – that’s unprecedented. It hasn’t been seen since ASB back during the GFC cancelled about $1 billion of preapprovals,” Bruce Patten, a Loan Market mortgage adviser, said. “This thing from Kiwibank to cancel preapprovals is quite unique […] we’ve not been told any reason why and it’s kind of out of the blue.”
Meanwhile, a spokesperson for the Wellington-based lender noted that while it was sympathetic to the challenges faced by first-home buyers in New Zealand, the Reserve Bank’s rules require it to stop accepting pre-approval applications over 80 per cent LVR for the time being.
