NZ banks put the screws on credit - the rules have changed
4:30PM Friday Sep 26, 2008

New Zealand banks and wholesale mortgage lenders are tightening credit criteria, pulling longer term loan offers and hiking rates for riskier lenders in a further extension of the "credit crunch" sweeping the globe.

Mortgage brokers say banks have reduced loan to value ratio limits, increased margins for 'low-doc' (riskier) loans, tightened the pool of professions that can be lent to and in some cases removed fixed rate mortgages altogether. A low-doc loan is granted to a borrower without documentation of income. They are often used by self-employed borrowers or those operating as traders.

"Those looking for finance must realise that the rules have changed and lenders are imposing more stringent conditions. Expect further tightening in credit conditions," said William Cairns at mortgage broker Cairns Lockie.

"Lenders are asking for 100 per cent confirmation of income, with low-doc loans being looked at more closely," said Cairns.

Mike Pero Mortgages also said banks had tightened lending criteria. GE Money Home Loans withdrew its mortgage rate offers to brokers this week and dropped its own 2 and 3 year fixed mortgages because of massive hikes in funding costs on wholesale markets.

More here.