Restrictions based on offshore borrowers

The last week has seen policy changes by ASB, ANZ, BNZ and Westpac targeted at offshore borrowers. Effectively while this again looks like Banks are massively tightening criteria this is in reaction to an extent to mortgage fraud issues which have eventuated in Australia and are designed to limit the chance of this happening here. Basic changes are that foreign income for borrowers who are not NZ or Australian citizens or whom do not have permanent residency here will not be excluded. For NZ or Australian citizens or those whom have permanent residency are effectively having this foreign income scaled or further rules put on what kind of funding can be accessed.

A summary of changes are copied below.

If you have any queries in regards to this please feel free to contact us (09) 486 4710 so we can help advise you on your specific requirements.
 

ANZ – have made changes to their criteria for applications that rely on Overseas Income, effectively immediately as at June 9^th:

• A maximum LVR of 70% is applied;
• Facilities are restricted to owner occupied properties;
• Boarder income not permitted;
• No interest only lending will be available;
• ANZ Flexible Home Loan will not be available;
• Standard residential property only and will not be available for the purchase of bare land or construction;
• Lending is only available to individuals (no company or trust entities);
• Refinances are available however no additional lending is permitted;
• No cash contributions available;
• Customers must complete all Customer Due Diligence (CDD) and account opening processes in person at a New Zealand branch of ANZ prior to settlement (with original documentation);

Westpac – also have made the following changes as at June 9^th:

• Westpac will no longer lend to non-resident borrowers with overseas income
• The maximum allowable LVR for NZ citizens and permanent residents with overseas income is 70% (from 85%)
• Borrowers on temporary resident visas will only be accepted if they have both a New Zealand address and NZ based income.
• New Zealand residents and permanent residents who currently live overseas and earn offshore income (not self-employed or business income) are able to borrow however the maximum allowable LVR has been reduced from 85% to 70%.

BNZ – as at June 10^th:

• Foreign income of people who are not New Zealand or Australian citizens, or do not hold a current permanent residency visa won’t be recognised for servicing purposes. This is the case, regardless of whether or not they reside in New Zealand.
• New Zealand and Australian citizens and permanent residency holders, who are not currently residing in New Zealand using foreign income to service a loan will now have a maximum allowable LVR of 60%. Customers in this category will also have a 40% shade applied to the value of their income earned overseas, when calculating their ability to service the loan.
• If the customer resides in NZ an the income is foreign, it will be shaded by 10%, and usual LVRs apply.

ASB – this has always had a 30% scale on overseas income, but the servicing margins have been increased to 7.55% P&I for all new lending:

• Overseas income will no longer be used where applications do not hold NZ citizenship or permanent residency
• Overseas income will continue to be used where applcants have NZ Citizenship or Permanent residency, who are living in NZ or overseas, subject to:
  • Maximum 70% LVR
  • Overseas self-employed income/business income will not be accepted
  • The applicants must meet in person at an ASB branch to confirm loan approval and provide original documentation
• Lending to applications who do not hold NZ citizenship/residency will be considered subject ot:
  • Max 70% LVR
  • Temporary resident Visa allowing them to work in NZ for minimum of 12 months remaining
  • Intention to live in NZ and gain permanent residency
  • An NZ income
  • Currently living in NZ at a permanent address
  • Owner occupied purposes only

Sovereign – is effectively the same as ASB.

 

Changes are coming which will include further credit control tools. It is likely to get harder to access investment lending and there is the chance that the cost of credit could rise. Action points to consider are:
 

1. Topping up your investment properties now to either replenish revolving credit facilities or pay down debt on your personal residence
2. Increasing revolving credit limits (note that this is lender dependent as some are very restrictive in regards to this).
3. If you have investment builds or are signed up for purchases off the plans make sure your funding is in place.
4. Assess your interest rate strategy

 
If you are wanting a meeting to discuss further to see how these may apply to your situation or if you would like us to assist with any of the above please contact us on 09 486 4719.

Read more June 2016 articles written by Kris Pedersen that talks further about changes to the current finance market:

ANZ tightening some criteria especially around investment builds

Investment interest rates increasing