Pre-approvals hit by Covid-19

Monday 20 April 2020

Banks are withdrawing pre-approvals for home loans amid the Covid-19 outbreak, as credit conditions continue to tighten. 

Advisers across the industry have reported that major banks are taking a hardline stance on pre-approved home loans as the Covid-19 outbreak continues. 

Banks have started to reject pre-approvals for new loans, leaving some home buyers in limbo as they attempt to complete property purchases. 

One adviser, who asked not to be named, said borrowers were being left "high and dry" by banks. He said the clampdown on new loans was "not in the spirit of what we think the RBNZ is trying to manage".

The adviser added: "Lenders realise they have a tiger by the tail in terms of existing business but seem to be closing the shutters wherever they can in terms of new risk, which the RBNZ clearly doesn’t want. Such behaviour is to going to be yet another head wind for the economy."

TMM Online has viewed several examples of pre-approvals being cancelled by the major banks. One customer with an LVR of less than 75% and confirmation their employment status had not been affected by Covid-19 was rejected by BNZ. 

Meanwhile, some ANZ borrowers have not been able to proceed with their settlements as approvals have expired during the lockdown. 

To extend pre-approvals, ANZ has asked customers for written confirmation they have not been impacted by Covid-19, verification of their income from the current month, and confirmation their deposit has not been reduced.

The pre-approval headaches come as banks tighten up credit availability for new borrowers. Advisers report the banks have also cut down on cash-back offers for new customers in recent weeks. 

Comments from our readers

On 20 April 2020 at 9:44 am Veteran Charles said:
There may be a bit more work handling things case by case but I haven't found that banks are going butternuts across the board. We are still seeing good cash contributions from ANZ and no-one on our books has been left high and dry, so to speak. However we have only a small sample, mostly ANZ, and I am not saying that the article is misleading or incorrect as such.

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