Low equity loans fine as long as priced properly: Church

Mortgage Rates

RESIMAC New Zealand general manager mortgages, Adrienne Church, says the changes in pricing are to ensure what it charges is appropriate to the risk it takes on as a lender.

Besides its Lo-Doc product RESIMAC now has pricing to loans in 80-85% LVR band, 85-90% band and for loans with at least 20% equity.

There is now a 20 basis point loading for >80% LVR lending step for >85% lending (loans for 85.01-≤90% LVRs) will have an additional 50 point premium over the base rates. (See table below for full rates).

Church says RESIMAC has seen good lending volumes receiving more than $40 million in applications last month.

There is also demand for loans with less than 20% equity. It is the growth in this business which has prompted the changes in pricing.

She says it appears that the major trading banks are steering clearing of low equity loans with all the talk around the Reserve Bank introducing macro-prudential tools.

RESIMAC has seen the banks turn away perfectly good deals, which she is prepared to write as long as the loan is priced appropriately.

Church’s message to brokers is that it will write low equity loans.

RESIMAC's low equity margin loadings which can be capitalised into the loan. They are 20 basis points where the LVRs between 80.01-≤85% LVR and 50 points for 85.01-≤90% LVR.

Variable1 year2 years3 years4 years5 years
< 80.0%5.59%5.35%5.65%6.05%6.30%6.60%
< 85.0%5.79%5.55%5.85%6.25%6.50%6.80%
< 90.0%6.09%5.85%6.15%6.55%6.80%7.10%
Lo Doc6.59%6.35%6.65%7.05%7.30%7.60%