Latest / Best of Business / Jenee Tibshraeny: NZ Herald Wellington business editor on the increase in new lending going to first-home buyers with small deposits

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Jenee Tibshraeny: NZ Herald Wellington business editor on the increase in new lending going to first-home buyers with small deposits · Best of Business

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  Speaker 2: So a record portion of new banking bank lending to
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  Speaker 2: first home buyers is going to people with small deposits,
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  Speaker 2: and this is thanks to looser lending rules from the
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  Speaker 2: Reserve Bank. Jene Tubs Trainey, the Herald's Wellington Business editor,
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  Speaker 2: is with us on this. Higienaate hi Heaven give me
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  Speaker 2: the numbers.
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  Speaker 3: All right. So in January, banks lent one point one
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  Speaker 3: billion dollars to first home buyers. Of that one point
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  Speaker 3: one billion, fifty seven percent went to first home buyers
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  Speaker 3: with deposits of less than twenty percent. So that fifty
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  Speaker 3: seven percent, more than half of new lending to first
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  Speaker 3: home buyers went to borrows with relatively small deposits. Now,
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  Speaker 3: you know, deposit of fifteen percent is not alarming, but
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  Speaker 3: that portion is definitely higher than it's ever been in
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  Speaker 3: the past. So, you know, people who have tried to
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  Speaker 3: get a mortgage will be aware that the Reserve Bank
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  Speaker 3: and post is these LVR restrictions on banks. You know,
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  Speaker 3: the Reserve Bank doesn't want banks to lean too much
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  Speaker 3: to people with small deposits. It's trying to protect banks
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  Speaker 3: from themselves. But you know, first home buyers, it would appear,
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  Speaker 3: have been trying to make the most of the low
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  Speaker 3: interest rates, flat house price growth, attractive cash backs offered
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  Speaker 3: by banks, and slightly looser LVR restrictions currently imposed by
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  Speaker 3: the Reserve Bank.
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  Speaker 2: Does feel a little bit like, you know, it has
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  Speaker 2: been the story that first home buyers have been dominating
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  Speaker 2: all like a significant force in the property market for
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  Speaker 2: so long. Now it does feel like the new normal,
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  Speaker 2: doesn't it.
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  Speaker 1: Yeah.
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  Speaker 3: Look, I mean they've definitely been prominent, I think probably
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  Speaker 3: since the end of the Labor Party's time and government,
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  Speaker 3: because you know, the interest deductibility rules put investors off.
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  Speaker 3: You know, Labor stopped investors from deducting all of their
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  Speaker 3: interest is an expense, the bright line tests was taken
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  Speaker 3: to ten years, which which really did make it like
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  Speaker 3: a capital gains tax. And also the Reserve Bank composed
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  Speaker 3: really strong LVR and debt to income restrictions on investors,
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  Speaker 3: so I think that put them out. And then of
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  Speaker 3: course the high interest rates that didn't help. So you know,
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  Speaker 3: it has made way for foth first time buyers. I
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  Speaker 3: must say, yeah, if you just look at the bank
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  Speaker 3: lending figures, as some of us do, look at them
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  Speaker 3: quite a lot. You know, investors have pulled back a lot,
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  Speaker 3: and during times when the property market has been hot,
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  Speaker 3: you know, they were taking out a lot of debt
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  Speaker 3: and you know, small deposits and lots of debt compared
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  Speaker 3: to the incomes. That's totally changed.
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  Speaker 2: Now do you notice what your take on this, because
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  Speaker 2: I know you've been covering it. Looking at the scale
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  Speaker 2: of what the Reserve Bank is wanting, wanting from retail
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  Speaker 2: banks with cash access business, the cash access plan, looking
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  Speaker 2: at the reaction from the retail banks, and then the
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  Speaker 2: admission today from the Governor that they had maybe actually
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  Speaker 2: not done this quite the right way. I'm putting these
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  Speaker 2: things together and I'm thinking the Reserve Bank's going to
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  Speaker 2: have to scale back what it's proposed.
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  Speaker 3: What do you think I definitely think so. So we
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  Speaker 3: discussed this last week, I think it was on the show.
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  Speaker 3: The Reserve Bank is proposing to require banks to set
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  Speaker 3: up about one three hundred new banking hubs. So those
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  Speaker 3: are ones where all the banks team up and they
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  Speaker 3: let you take money out and let you also deposit money. Now,
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  Speaker 3: currently there are five of those hubs five, the Reserve
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  Speaker 3: Bank wants one three hundred and wants people to be
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  Speaker 3: able to use those for free. You know, that's a
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  Speaker 3: pretty hefty proposal, and as we talked about, I think
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  Speaker 3: there's clearly a problem people don't have enough access to
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  Speaker 3: cash services. It's not just taking cash out, but it's
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  Speaker 3: if you have a business, it's being able to go
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  Speaker 3: to the bank easily or go somewhere easily and deposit
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  Speaker 3: your money. But the first question I asked the Reserve
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  Speaker 3: Bank on this last week, is your proposed response proportionate?
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  Speaker 3: Oney three hundred does sound like a lot of banking hubs.
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  Speaker 3: The Reserve Bank said, if they don't do banking hubs,
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  Speaker 3: maybe if they just do ATMs, it would need like
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  Speaker 3: three thousand more three thousand. I feel like they're going
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  Speaker 3: to have to scale it back in terms of the
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  Speaker 3: bank's responses. I talked to k E Banks chief executive
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  Speaker 3: Steve Yukovic, and he said, you know, the bankers they
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  Speaker 3: had lunch with the Reserve Bank the day before it
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  Speaker 3: released its plan, and the Reserve Bank didn't say anything
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  Speaker 3: about the plan, so they felt blindsided. I don't think,
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  Speaker 3: you know, probably not too much love will be lost
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  Speaker 3: for the banks. They'll be all right. No, they're tough enough.
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  Speaker 3: We always they'll be fine. But you do need to
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  Speaker 3: have a proportionate response.
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  Speaker 2: To a problem too, right, Hey, listen, Thank you very much.
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  Speaker 2: As always, I appreciate it. Janative Charany, the Herald's Wellington
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  Speaker 2: Business editor.
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