Kiwibank Withdraws Pre-Approvals for Low Deposit Home Loans
Kiwibank says she needs to make the switch to stay on the safe side of the LVR rules.
Kiwbank is warning borrowers with existing pre-approvals who may find they cannot borrow as much money as they want.
He sent a note to mortgage brokers stating that he cannot accept any pre-approval request greater than 80% of the purchase price of a property, except those exempt from the lending rules- Bank reserve value (LVR), such as new construction. .
As of November 1, banks can only lend 10% of their new loans to homeowners who want to borrow more than 80% of a home’s value. Investors face a more stringent requirement.
Kiwibank said it will accept pre-approval agreements for auctions and tenders where the bank has already accepted a specific property, provided the offer or offer is made or accepted by Friday night. latest.
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âExisting approved pre-approvals for which there was no specific ownership under the approval will now be limited to a maximum of 80% LVR. We will provide you with a list of these clients to confirm if the request should be canceled. If you have sent a contract of sale and purchase after 5pm on Friday November 12th, we will not be able to proceed with that approval or that property for which more than 80% loan is applied.
Mortgage brokers said that while a number of banks did not offer pre-approvals to people who were not already clients of the bank, Kiwibank’s decision to change existing pre-approvals was different.
âKiwibank withdraws pre-approvals – it’s unprecedented. This has not been seen since the ASB canceled about $ 1 billion in pre-approvals during the GFC, âsaid Bruce Patten, mortgage lending advisor.
“This Kiwibank thing to cancel pre-approvals is pretty uniqueâ¦ we weren’t told why and it’s kind of out of the blue.”
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A spokeswoman for Kiwibank said she is sensitive to the challenges first-time homebuyers face, but needs to stop accepting pre-approval requests of over 80% from LVR for the moment in order to comply with the rules of the Reserve Bank.
âWe still accept agreements for existing conditional pre-approvals for auctions or tenders as long as the successful bid has been made and accepted by 5pm on November 12th.
âBeyond this date, the availability of existing conditional pre-approvals in the market from all lenders who do not meet minimum deposit requirements is very limited. Because this is a change, we are proactively reaching out to our clients in this situation and they will need to work with their advisor to determine the options available for their specific situation.
Patten said her brother, who is also a broker, has three clients who are over 80% pre-approved who may not be able to use those approvals.
Her colleague Megin Wilton said she had to scramble to find another option for clients who had made an offer on their first home.
They got the offer accepted and sent the deal to Kiwibank last week, but the bank had asked for more information. Then on Monday he said he would not go ahead because demand was over 80 percent.
She said the client had already spent money building relationships and legal fees. âThe options are really limited.
“It’s really unfair to post an email saying they’re going to do it when they’ve already issued a conditional approval.”
He was later told that Kiwibank would honor the pre-approval because the buyers sent in the required information before the deadline.
Patten said other banks were cautious about pre-approvals due to the volume of applications received. BNZ’s decision to restrict lending to borrowers wanting loans more than six times their income pushed some loans to other banks, he said. âThe other banks reimburse all the loans that do not meet the BNZ criteria and there is a lot of news for bank requests.
âAlmost none of the banks are doing pre-approvals yet, over 80% are just contractual agreements. It’s just because it’s so hard for them to manage their pipeline when they only have 10 percent. We saw it last time, once a bank was full everyone went to another bank and got them full.
Glen McLeod, of Edge Mortgages, agreed that banks are focusing on on-line transactions and trying to take care of their own customers.
New lending rules, which require banks to take a closer look at borrowers’ ability to take out a loan, were added to the process, he said. âIt means the lines have grown longer because they have to go through everything. “