Bruce Patten: Loan Market Mortgage Advisor on the difficulty in accessing bank loans despite falling mortgage rates

Mortgage rates are continuing to fall, but it isn't getting any easier for many people to access bank loans. 

Latest figures from interest.co.nz show one-year mortgage rates have fallen to around 6.33%, down from about 7.35% in January. 

But banks have told our newsroom they're still testing applicants at between 8.5 and 8.7%. 

Loan Market Mortgage Advisor Bruce Patten told Mike Hosking that banks are being overly cautious at the moment. 

He said that it won’t be until inflation rates get back to normal that they’ll ease off on the caution. 

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Episode Transcript

Speaker 1 (00:00):
Questions are smalling around the banks designed to get money
into the market. Despite the fact interest rates are falling,
some banks are still apparently stress testing at a shade
under nine percent now. A loan market mortgage advisor Bruce
Patten's with us on this. Bruce, very good morning to you.

Speaker 2 (00:13):
Good morning Mike.

Speaker 1 (00:14):
How wide spreads that at just under nine percent.

Speaker 2 (00:18):
They're starting to drop just some of them are waiting
at the moment. I mean, you need to understand the
reason the banks introduced these test rates in the first
place was to try to prove to the Reserve Bank
that they didn't need to introduce DTIs, And now that
they have, the banks really could review some of this exactly.

Speaker 1 (00:35):
I see, I'm getting a mixed message. I thought the
banks were into getting money into the market. Hence you
had a bit of competition and the interest rates were falling.
And if that's the case, how then do you want
to Is it just safety or they being overly cautious.

Speaker 2 (00:48):
Well, I think they've been overly cautious at the moment,
but with the cost of living being so high, they're
just really conscious that it's e's extremely expensive for people
all around. It isn't just about mortgage anymore. Everything is
costing more insurances. You know, you've seen it all. So
until those inflation rates get back to normal, I think
they're just going to be cautious. They're trying to act

(01:10):
below the dtiyes. So at the moment you can't actually
even get to the level that the Reserve Bank is
set with like a six times income. You can get
that high with the test right. So I think it'll
balance out as we see these interest rates start to drop.
And I think tomorrow's announcement will be very key in
seeing some of those test rates come. Well.

Speaker 1 (01:28):
I was going to say, if they go fifty points,
I mean you can't possibly still stress test just underlying,
can you.

Speaker 2 (01:35):
That's right? So I think you'll see a big move
once the Reserve Bank signals its intentions. And you know,
if they don't go fifty, I think they'll be they'll
be a bit of anarchy out there about it.

Speaker 1 (01:46):
Well, I reckon, and what's the demand for money? Like,
did the first move make a material difference in your
view or not?

Speaker 2 (01:53):
Absolutely? And we've seen it and you've talked about it
this morning. Already open homes are busier. There's definitely a
bit there feeling out there, so there's more people out
and about, so it's all going to flow through, and
it's just really a timing thing about how how long
it'll be before they bring these down. They're not that
far away. You can borrow about five and a half
times your income on average at the moment. It's going

(02:14):
to stop at six, so the test rates become irrelevant
once the interest rates drop. Anyway, Yeah, exactly.

Speaker 1 (02:20):
With all the rules that we've got, you d to guys,
I mean, are they working. I mean, I've forgotten what
they were trying to achieve at the end of the day,
so many bloody rules to go through now, I mean,
is it all sort of working?

Speaker 2 (02:31):
I think so. I think the fact is the DTOs
are a very blunt instrument, and they're probably not the
way we should have gone. But it was a reaction
to the fact that the reserve bank rates get to
two percent if people could borrow ten times their income,
and it's their reaction to that to say, gif rates
get down again, to say four four and a half
if we were lucky enough to sit them there. I

(02:51):
don't think we will, But if we were, and you
could still borrow eight times your income. Then that's a problem.
So it's a reaction to something that's in the past.
They could have fixed it long ago. They had the
ability to do t DTIs when ranked for that loan,
and they chose not to.

Speaker 1 (03:06):
That's almost as though Adrian cocked it up. Bruce appreciated.
Bruce Patton, who's the loan market mortgage advisor, with us
this morning.

Speaker 2 (03:12):
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