BNZ has set a new " guard bar" to house loan borrowers!
This is being set at six times the amount of money that is earned by a borrower.
The BNZ bank explained its actions by saying it is a responsible lender and takes its obligations seriously.
It adds a less formalised version of DTI has long been applied to all loans anyway, since all banks look at borrowers' earnings when assessing their ability to make interest payments.
It adds it is looking at the overall level of debt its customers take on to ensure they are in a secure position with rising interest rates.
This action comes as long term rates have already risen and look certain to rise further as historic low interest rates fade away world wide.
The alternative would have been to do nothing and wait for the Reserve Bank to move, and perhaps be stuck with a lower number such as five.
Patten added the figure of six was one which the banking system could live with but would be especially hard on first time home buyers.
Many of these were low income earners who could buy very little under a DTI of six. But they were generally young, and would earn more as they get promoted in their career, so were of no real risk to the banking system.
--(Distribute from Eric Frykberg)
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