BNZ tells borrowers they can’t borrow more than six times their income


BNZ says it is taking action as a responsible lender.

Chris McKeen / Stuff

BNZ says it is taking action as a responsible lender.

BNZ limits the amount people can borrow to buy a house to six times their income when they apply for a loan through a broker.

It is the first traditional bank to officially adopt a debt-to-income ratio for home loans.

A spokesperson for the bank said it is a responsible lender and takes its obligation to comply with regulations and requirements seriously.

“With an increased regulatory focus on debt-to-income ratios as a way to create a more sustainable housing market, BNZ is making some changes to the way it rates loans in our brokerage channel.

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“We are looking at the overall level of debt incurred by our clients to make sure they are in a safe position with rising interest rates.

“Currently this will be set at six times, but like all of our loan policies, we will constantly monitor and review. The new policy is effective as of the end of today.

He said that while the change was initially applied to brokerage loans, the ratio was already part of his assessment across all channels and that he was considering how the changes would apply more broadly.

This means that a household with a combined income of $ 100,000 could not borrow more than $ 600,000. The rule applies to homeowners and investors.

Debt-to-income ratios have been on the Reserve Bank’s radar for years, but discussions have intensified in recent months.

In June, it was revealed that the Reserve Bank would soon be able to impose a ratio on banks.

The central bank announced that it had reached a deal with Finance Minister Grant Robertson on adding “debt service restrictions” to the tools it could use.

In addition, starting in December, new rules under the Credit Deeds and Consumer Credit Act require lenders to impose more scrutiny of applications to ensure borrowers can afford their loans. .


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Robertson said he believed the income debt controls should only apply to investors, but the Reserve Bank said it believed a single limit could be set at a level that would allow largely to achieve this goal.

The bank said its analysis showed that tools such as debt-to-income limits were probably “the most effective additional tool that could be deployed by the Reserve Bank to support financial stability and price sustainability in the economy. housing “.

Controls are used abroad to limit the amount people can borrow, to a multiple of their income. In Britain borrowers are often limited to no more than 4½ times their annual income.

The Reserve Bank told Robertson that a debt-to-income ratio of seven would have a minimal effect on first-time homebuyers but would deter some investors, and that a cap of six would have an impact on moderating home prices. housing and investor demand, but could also prevent some first-time buyers from entering the market.

Edge Mortgages broker Glen McLeod said the BNZ rule would shut down some buyers, but it was an example of the bank being proactive and bracing for any regulatory change.

He said Kiwibank had also released its new calculator, which would add an additional level of complexity for borrowers as the bank would have to verify all the information brokers had already verified.

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