UP FRONT • TMMONLINE.NZ/NEWS
Tough year ahead for investors Advisers are predicting a tough year ahead for investors as new restrictions on lending loom. The Reserve Bank of New Zealand has announced a new “60/5” rule, meaning banks will only be able to lend 5% of their book to investors above 60% LVR. In effect, it means most investors will need a 40% deposit from May. ASB, ANZ and BNZ have mandated new 40% deposit requirements for investors in recent weeks. ANZ said it introduced the new rules as “escalating property prices are putting home ownership out of reach for many Kiwis”. It said, “Current settings favour property investors particularly over first home buyers.” In February, BNZ and ASB dropped a bombshell on advisers, halting new loan applications for investors unless they have a 40% deposit. BNZ said its decision was due to “unprecedented demand”, adding it wanted to prioritise existing customers. The decisions come as investors are
Warning on fee for service charges More clients are playing off mortgage advisers against their bank, leading to disputes over fee-for-service charges, says FSCL chief executive Susan Taylor. In a red-hot mortgage market, a growing number of clients are using an adviser to source a low rate, and using that rate to negotiate better terms with their bank. After ditching the adviser and sticking
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blamed for fuelling record house price growth in New Zealand. Investors borrowed $2.24 billion in November, up on $1.8 billion in October, close to the record $2.4 billion borrowed in May 2016, according to RBNZ data. Investor lending at high LVR levels, above 70%, rose to $844 million in November, up from $745 million the month before. Those levels have not been seen since 2014-2016. Advisers fear their investor clients face a challenging year ahead. David Green of adviceHQ said: “Landlords have certainly had a tough time over the past 12-18 months with different laws and regulations coming into place. There’s definitely a feeling that things are getting harder for investors. “In terms of lending conditions for lenders, I can’t see it getting any easier,” Green added. “We will have to wait and see what the Reserve Bank does, and whether it returns to pre-Covid LVR settings, or the stricter prior settings in place years ago. “Any decisions have ramifications on the wider economy. There’s still a lot at with their bank, some borrowers have been shocked to learn they are subject to “fee-for-service” charges, the Financial Services Complaints Limited boss says. “More people are sourcing a loan through an adviser, deciding not to proceed, and staying with their existing banks. However, in these situations, advisers are perfectly entitled to charge for their time,” she adds. “From time to time we see clients acting badly, and trading off advisers with their banks. We've seen some complaints about it as clients are unaware they could be charged a fee if they didn't proceed with the loans.”
play here, and another Covid outbreak could change everything.” Geoff Bawden of Q Group said advisers have been “singled out” unfairly for the sharp increase in house prices. “While they are partly responsible, in my opinion there are other contributing factors – such as shortage of good stock; Kiwis can't travel so they are looking to spend; first home buyers have been panicking, with low interest rates.” Bawden added: “Banks have already tightened the noose for investors. They did that in November and from what I can see it hasn't really dampened enthusiasm. I don't see Reserve Bank policy change having much impact because the outcomes have already been acted upon.” Bawden said responsible lending principles would make things harder for investors in the year ahead. “Responsible lending will continue to drive outcomes and exclusions around what can be included as income, scaling of income and stress testing will continue to be the norm which makes it difficult for everyone, particularly investors,” he added. With more clients playing off advisers against banks, Taylor warns advisers to make sure their agreements are clear and charges are outlined, leaving no room for ambiguity. “Advisers are entitled to be paid for their time provided they are clear about it,” she says. “Point it out to the client at the start, and explain. The vast majority of people understand advisers need to be paid, provided they know about it. Most people are perfectly comfortable with advisers earning a fee like any other professional, like a lawyer or accountant. Advisers don't need to be shy about letting people know fees will be payable.”
