The $2,500 hitch: ANZ reopens the door to low-deposit home loan borrowers

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ANZ has reopened low deposit home loans, but there are conditions. Photo / Steven McNicholl

The nation’s largest bank has reopened the door to low-deposit home loan approvals, but there’s a big catch – they must have $2,500 of disposable income per month.

In November, ANZ NZ suspended loans to those with deposits below 20% who wish to purchase existing properties.

The Reserve Bank tightened bank lending limits on Nov. 1, meaning banks were only allowed to make 10% of new loans to homeowners with a low deposit.

ANZ told mortgage brokers this morning that it was once again open to low deposit lending.

“We are pleased to announce that effective today, we have reintroduced approvals for over 80% of LVR [loan to value ratio] loans that meet the criteria below.

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

Karen Tatterson, mortgage broker at Loan Market, said ANZ has in the past had a monthly uncommitted income excess requirement, which she said was around $1,000.

“So it’s a pretty big jump and it’s going to be a big call. It’s only people with very good incomes who will be able to qualify who don’t have discretionary spending.”

Tatterson said it was stiff, but she said the bank was in a position where it could dictate to whom and what it wanted to lend.

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

“It was available for about 24 hours and then they pulled the pin because obviously the allowance came in pretty quickly.”

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

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

“You have to be under contract for them to actually do it.”

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

“It wouldn’t be a few people on a basic income. You’d have to be semi-professional, have no debt, so as soon as you start talking about student loans and credit card limits and car loans, it’s going to pull the HMI down.

“And the other key thing is that they’re going to have to be very strict about their discretionary spending. That’s what’s excluding people, it’s not the math, it’s their discretionary spending that we’ve never had to detail in the past. Generally, people with higher incomes tend to have a higher level of discretionary spending.”

These expenses are under the spotlight due to a tightening of the law on credit agreements and consumer credit which came into force on December 1st.

The government set out to review it after several public complaints and a petition signed by more than 10,000 people.

Tatterson said ANZ was the first of the big four banks to come back offering to do low-deposit loans since they all pulled it out at the end of last year.

She expected the other three to follow eventually.

“It’s for them to make sure they meet their requirements under the Reserve Bank restrictions.”

An ANZ spokeswoman said the pause on LVR loans at over 80% was still only a temporary measure that was needed to help it meet the Reserve Bank’s tightened LVR measures.

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