Frances Cook and OneRoof’s Need to Know series set the record straight for the home loan process.
The mortgage rate wars escalated with another bank offering a rate below 2%.
HSBC introduced a rate of 1.99% for fixed 12 and 18 month maturities corresponding to the Heartland Bank rate.
On top of that, HSBC has relaxed its criteria by opening it up to households earning more than $ 125,000.
Previously, those who wanted to take advantage of HSBC’s special rates had to qualify as a premier customer by borrowing a minimum of $ 500,000 or having a bank balance of at least $ 100,000.
Martine Milicich, head of wealth management and personal banking at HSBC, said she had broadened her eligibility criteria so that many more people could take advantage of the opportunity.
Eligible borrowers now only need to qualify for one of the three criteria.
The rate is available to new clients and existing senior clients who borrow an additional $ 100,000.
She said HSBC changed its world-leading offering in the past year after discovering people took out a loan of $ 500,000, but then paid it off and did not comply. to the criteria.
“We have an income test in place, which means that clients who meet those criteria or have those deposits or that mortgage will actually meet our criteria and therefore we will be able to support these top clients all the way. throughout their life. It makes a lot more sense from there. perspective. “
Heartland launched the very first mortgage rate below 2 percent in New Zealand in October last year with a rate of 1.99 percent for one year.
To be eligible, clients must refinance or purchase a standalone single-section home, have a deposit or equity of at least 20 percent – and intend to live in the home.
So far, the big banks – ANZ, ASB, BNZ, Westpac and Kiwibank have not followed suit although they have lowered their one-year rates to 2.29 percent with a range of different terms.
Milicich said he hopes the change in criteria will help increase his mortgage portfolio, which is worth around $ 2.2 billion, or just under 1% of the market.
“I think this will help us grow our mortgage portfolio, but it will be for a section of clients. The reality is that the dominant criterion for our mortgages will always be the half-million mark.”
She said that in Auckland there were a lot of clients who would meet those criteria, but the change was designed to capture those who had a good income but might only want to borrow $ 200,000.
“These are the ones we really want to keep.”
HSBC’s campaign for more customers comes a day after the Reserve Bank announced it was tightening the amount banks could lend to low-deposit borrowers in a bid to cool the boiling real estate market.
From March 1, banks will only be able to grant up to 20% of new loans to homeowners with a deposit of less than 20% and up to 5% to investors with a deposit of less than 30%.
Then, on May 1, it will increase again for investors whose banks are only allowed to lend up to 5% to those whose deposit is less than 40%.
But the Reserve Bank has said it expects banks to honor the changes immediately.
The ANZ moved to a 40% deposit requirement for investors before Christmas while the ASB, BNZ and Kiwibank introduced the requirement for investors last week.
House prices have risen 17% in the past year, defying forecasts that the market would drop 5-10% when New Zealand went into lockdown in March of last year.
Milicich said that when the Reserve Bank removed the restrictions on the loan-to-value ratio last year, it did not change its lending criteria and stuck to requiring a 20% deposit for homeowners and 30% for investors.
“For us, we now only need to modify slightly up to 60% [40 per cent deposit]. “
She said there were many things that fueled house prices – supply, the return of the Kiwis, the action of the Reserve Bank, consumer confidence.
“I don’t think this rate will have an impact to fuel the market.”
She said that historically changing the LVR setting has changed the market and she expected those changes to have an impact.
Are the rates as low as they will go?
Milicich said: “If you had asked me two weeks ago, I probably would have said no. But given what happened last week with employment, wholesale rates have gone up a bit, so it might start to spin. “
But she said no economist had predicted it yet.