ASB boss confident tough new lending rules will be eased so fewer home loan applicants are 'knocked out'

Wednesday, 9 February 2022

ASB has rejected about 7 per cent of home loan applicants who would have qualified before new lending regulations were introduced, chief executive Vittoria Shortt​ says.

Shortt is the second head of a big bank to make public claims about the impact of the new regulations which were introduced on December 1 in a bid to protect vulnerable borrowers from predatory lenders.

Critics claim the regulations are too prescriptive and have had the unintended consequence of reducing banks’ ability to lend to many ordinary, non-vulnerable people who would have qualified for home loans in November.

Earlier this week, ANZ chief executive Antonia Watson said she told Commerce and Consumer Affairs Minister David Clark that the regulations had resulted in 6 per cent of applicants who would have got a home loan from ANZ in November no longer qualifying.

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Watson and Shortt were among the bank chief executives invited by Clark to face-to-face meetings last week to share their concerns over the new regulations.

Speaking after announcing a $742 million half-year after-tax profit, Shortt said she briefed Clark on the impact of the regulations on ASB's lending but did not learn about ANZ’s increase in home loan declines until later, after she saw it reported.

“Ours is 7 per cent. I was surprised to see the similarity. I have not seen any other bank talking about that,” Shortt said.

Following pressure from mortgage brokers, ACT leader David Seymour and National Party commerce spokesman Andrew Bayly, Clark ordered an inquiry into the impact of the regulations and whether they needed to be changed.

Shortt said she was optimistic changes could be made that would ease home loan lending without weakening protection for vulnerable borrowers.

There were customers who the bank was willing to lend to but were “getting knocked out”, Shortt said.

“We are very supportive of the intent of the legislation,” she said.

“We are very pleased to see the inquiry has been kicked off so quickly.

“I am pretty confident we can work through and get it to a good place.

“My read is people can see there have been unintended consequences” and that there would be some changes, she said.

During his defence of the new regulations, Clark had questioned whether banks had become more cautious lenders because of rising interest rates, fears about economic conditions, and restrictions by the Reserve Bank of New Zealand Te Pūtea Matua on low-deposit bank lending.

Watson said ANZ’s appetite to lend had not reduced.

Shortt similarly denied that ASB was less willing to lend.

“No, we have been very comfortable with our settings for some time now,” she said, despite ASB's economists forecasting an oversupply of housing by 2024.

The bank used a 6.45 per cent test rate when calculating whether people could afford a mortgage, she said.

“We have got a test rate which is significantly higher than our current interest [lending] rates. We are comfortable that, as a responsible lender, we have got settings that take into account all of those factors,” she said.

Credit card and overdraft lending had also been affected by the regulations, Shortt said.

“It has been felt across the board.”

Data from the credit reporting bureau Centrix has showed a sharp drop in the proportion of loan applications being approved.