Bank of New Zealand is the third major bank to make changes to their lending criteria for foreign investors, along with Westpac and ANZ which made changes earlier in the week.
announced on Friday they are changing their policy on how they recognize foreign income for lending.
The bank also cut its three year 'special' rate this morning by 10 basis points to 4.39%, bringing it in line with ASB
’s market-leading rate for 3 years.
BNZ has a robust income verification process for all lending and these policy changes reflect our commitment to implementing best practice policies for our wide customer base, the bank said in a statement.
The bank will no longer recognize foreign income of people who are not New Zealand or Australian citizens, or do not hold a current permanent residency visa, or servicing purposes, regardless of whether or not they reside in New Zealand.
New Zealand and Australian citizens and permanent residency holders, who are not currently residing in New Zealand using foreign income to service a loan will now have a maximum allowable LVR of 60%. Customers in this category will also have a 40% shade applied to the value of their income earned overseas, when calculating their ability to service the loan, the statement continued.
So only 60% of the income from a NZ or Australian citizen living overseas will be taken into account when the bank is considering their ability to service a new home loan in NZ.
Westpac New Zealand will no longer lend to non-resident borrowers with overseas income and those looking to borrow who are temporary residents will only be accepted if they hold a New Zealand address and receive a New Zealand-based income.
ANZ’s restrictions include only lending to owner-occupied properties but the restrictions don't affect Kiwis living abroad and buying with overseas income.
But research director at property information and analytics company CoreLogic Jonno Ingerson
says he doesn’t see the restrictions affecting the market, as many investors buy with cash.
"Probably 20% to 25% of Auckland investors don’t have a mortgage, they’re buying purely in cash, then any rules you have around lending aren’t going to touch those people,” Ingerson told TVNZ's Q+A.