RBNZ Limits Prompt Local Banks to Chase Borrowers, Kiwibank Says

New Zealand banks will become more aggressive in their pursuit of new mortgage lending in response to central bank restrictions, Kiwibank Ltd. Chief Executive Officer Paul Brock said.

Banks will offer cheaper home loans to people with high deposits in an attempt to expand their overall lending, giving them greater scope to lend to those with smaller downpayments, who are typically first-home buyers, Brock said on a conference call today.

The Reserve Bank of New Zealand announced last week that loans for more than 80 percent of a property’s value must account for no more than 10 percent of a bank’s new lending from Oct. 1.

“If we grow the total pie, we can do more lending at greater than 80 percent and support those first-home buyers,” Brock said. “How fast you grow sub-80 helps you grow above that. You will see more activity in that part of the market.”

More lending may undermine the central bank’s plan to curb the excesses of the property market. It is introducing the lending limits because it’s concerned that the banking system is getting over-exposed to any sudden collapse in house prices. Governor Graeme Wheeler has been reluctant to raise interest rates because that may stoke demand for the New Zealand dollar, hurt exports and hinder an economic recovery.

Banks will target borrowers who have high deposits by offering lower rates or other incentives, Brock predicted. He declined to talk about Kiwibank’s specific plans.

ASB Bank Ltd. on Aug. 23 began offering a home-loan fixed for six months at 4.75 percent to borrowers who have a 20 percent deposit and become customers for their other banking. Kiwibank’s six-month rate is 5.25 percent.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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