Jenee Tibshraeny: NZ Herald Wellington business editor on the increase in new lending going to first-home buyers with small deposits

A record portion of new bank lending to first-home buyers is going to those with small deposits.

More than half of the $1.1 billion lent to first-home buyers in January went to borrowers with deposits of less than 20 percent, according to the latest Reserve Bank figures.

NZ Herald Wellington business editor Jenee Tibshraeny explained further. 

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
So a record portion of new banking bank lending to
first home buyers is going to people with small deposits,
and this is thanks to looser lending rules from the
Reserve Bank. Jene Tibstraaney, the Herald's Wellington Business editor, is
with us on this hygien eight. Hi, heaven give me
the numbers.

Speaker 2 (00:15):
All right. So in January, banks lean one point one
billion dollars to first home buyers. Of that one point
one billion, fifty seven percent went to first home buyers
with deposits of less than twenty percent. So that fifty
seven percent, more than half of new lending to first
home buyers went to borrows with relatively small deposits. Now,

(00:37):
you know, a deposit of fifteen percent is not alarming,
but that portion is definitely higher than it's ever been
in the past. So, you know, people who've tried to
get a mortgage will be aware that the Reserve Bank
composes these LVR restrictions on banks. You know, the Reserve
Bank doesn't want banks to lend too much to people

(00:58):
with small deposits, trying to protect banks from themselves. But
you know, first home buyers, it would appear, have been
trying to make the most of the low interest rates,
flat house price growth, attractive cash backs offered by banks,
and slightly looser LVR restrictions currently imposed by the Reserve Bank.

Speaker 1 (01:19):
Does feel a little bit like, you know, it has
been the story that first home buyers have been dominating
all like a significant force in the property market for
so long. Now it does feel like the new normal,
doesn't it.

Speaker 2 (01:30):
Yeah. Look, I mean they've definitely been prominent, I think
probably since the end of the Labor Party's time and
government because you know, the interest deductibility rules put investors off.
You know, Labor stopped investors from deducting all of their

(01:51):
interests and expense, the bright line tests was taken to
ten years, which which really did make it like a
capital gains tax. And also the Reserve Bank composed really
strong LVR and debt to income restrictions on investors, so
I think that that put them out. And then of
course the high interest rates that didn't help. So you know,

(02:11):
it has made way for foth first time buyers. I
must say. Yeah, if you just look at the bank
lending figures, as some of us do, look at them
quite a lot, you know, investors have pulled back a
lot and during times with the property market has been hot.
You know, they were taking out a lot of debt

(02:31):
and you know, small deposits and lots of debt compared
to the incomes. That's totally changed.

Speaker 1 (02:36):
Now, will you take on this, because I know you've
been covering it, looking at the scale of what the
Reserve Bank is wanting, wanting from retail banks with cash
access business, the cash Access plan, looking at the reaction
from the retail banks, and then the admission today from
the Governor that they had maybe actually not done this
quite the right way. I'm putting these things together and
I'm thinking the Reserve Bank is going to have to
scale back what it's proposed. What do you.

Speaker 2 (02:57):
Think I definitely think so. So we discussed this last week,
I think it was on the show. The Reserve Bank
is proposing to require banks to set up about one thousand,
three hundred new banking hubs. So those are ones where
all the banks team up and they let you take
money out and let you also deposit money. Now, currently

(03:18):
there are five of those hubs five the Reserve Bank
wants one thousand, three hundred and wants people to be
able to use those for free. You know, that's a
pretty hefty proposal, and as we talked about, I think
there's clearly a problem. People don't have enough access to
cash services. It's not just taking cash out, but it's

(03:40):
if you have a business, it's being able to go
to the bank easily or go somewhere easily and deposit
your money. But the first question I asked the Reserve
Bank on this last week, is your proposed response proportionate
one than three hundred? Does sound like a lot of
banking hubs. The Reserve Bank said, if they don't do
banking hubs, maybe if they just do ATMs, it would
need like three thousand more three thousand. I feel like

(04:04):
they're going to have to scale it back in terms
of the bank's responses. I talked to k E Banks
chief executive Steve Yukovic, and he said, you know, the
bankers they had lunch with the Reserve Bank the day
before it released its plan, and the Reserve Bank didn't
say anything about the plan, so they felt blindsided. I
don't think, you know, probably not too much love will

(04:24):
be lost for the banks. They'll be all right. No,
they're tough enough always, they'll be fine. But you do
need to have a proportionate response to a problem.

Speaker 1 (04:34):
Too right, Hey listen, Thank you very much. As always,
I appreciate it. Janative Trainey, the Herald's Wellington Business editor.

Speaker 2 (04:39):
For more from Heather Duplessy Allen Drive, listen live to
news talks.

Speaker 1 (04:43):
It'd be from four pm weekdays, or follow the podcast
on iHeartRadio