Banks get cautious with home lending

Monday 21 June 2004

Banks are tightening their lending criteria as the housing boom cools, over-heated property valuations fall and interest rates continue to rise.

By The Landlord

Where banks once lent up to 80 per cent of the value of inner-city apartments, they are now often prepared to lend no more than 50 per cent of the value.

Banks are also taking a more cautious approach to lending on high-value coastal properties and on homes in places where boom conditions have bordered on bust.

Kiwibank chief executive Sam Knowles said Nelson, Wanaka and Queenstown were examples of locations where banks were taking a hard look at loan applications. Tighter loan criteria were decided case by case and could vary widely.


But the uniformly big change in banks' willingness to loan on the apartment market "only recognises the risks in this sector", he said.

Knowles said banks were now particularly cautious about apartment developments. But it was unlikely banks would revise lending criteria allowing homeowners to borrow up to 100 per cent of the value of the property in certain circumstances.

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