ASB - and Sovereign - has announced it will add a margin on any lending over 80% LVR.
For borrowers between 80% and 8%, the low-equity margin will be 0.3% per year. Between 85% and 90%, it will be 0.75%. Between 90% and 95%, it will be 1.3% and over 95% it will be 1.5%.
ASB said in a note to brokers: “The new low-equity margins reflect the costs associated with high-LVR lending. These include increased capital adequacy requirements on high-LVR lending imposed by the Reserve Bank of New Zealand.”
After six months, customers can apply for a reduction to a lower low-equity margin band or the removal of the margin with an updated valuation or when the loan balance drops.
The fee will continue to apply to applications received before February 23.
Loan Market adviser Bruce Patten said it was a significant shift. He said it seemed to indicate ASB was trying to bolster pricing on lending and trying to do less over 80%, or to get a better return on it. “There’s a bit of margin squeeze going on or the banks are trying to hold margin.”
He said the move would put pressure on ANZ, which is the only major lender without a margin. It still charges a one-off fee. “They’ve got a big book under 80% and they are writing the lion’s share of over 80% anyway,” he said. “It could put a squeeze on them. It does change the dynamic.”
It would mean other banks charging a margin were less likely to change that, he said.
The difference between paying a 0.75% fee once, upfront, to ANZ and paying 0.75% every year the loan remained in the 85% to 90% band could be quite significant, he said.
