If it walks like a duck, farts like a duck and makes a great confit like a duck, then it’s gonna be hard to call it anything else.

Yet that’s exactly what a couple of bank CEOs would have you believe.

Sorry, gents I’ve got to take you to task on this one.

The Mortgage Magazine published an article following an interview with the Westpac guy and the BNZ guy, where the question ‘are you rationing credit?’ was put to them. Both denied it.

The BNZ guy said that all they were doing was applying the RBNZ’s LVR restrictions.

I might be wrong but the average punter perceives LVR restrictions as being all about rationing credit. Does the fact that it was the RBNZ’s idea also mean the banks can’t be accused of doing the rationing? A case of it’s them, not us?

The Westpac guy reiterated the above sentiment, but quickly followed it up with an admission they have tightened up lending. He also referred to tightening up in terms of lending to offshore investors.

So when he says “However, as far as we can see there’s no particular tightening of credit at the moment. There’s no evidence of it”, it leaves me wondering if the duck confit I’ve been served used to be a pork bun.

The all-knowing Wikipedia says credit rationing is about a lender not giving out loans even if people are willing to pay a higher interest rate for the privilege of getting their hands on that money. So, isn’t the halt on lending to non-Kiwi buyers a case in point? These people can’t borrow from a bank for love nor money. They just can’t.

High LVR loans attract a higher interest rate and while banks are doing this type of lending (in fact, we specialise in helping clients get some of it) it’s disingenuous to hide behind this and say you’re not credit rationing. To hide like that misses the point completely.

The question ‘are you rationing credit’ is actually a nice way of saying ‘has it got harder to get finance?’. The answer is ‘yes, yes it has become harder to get finance’.

Here are some other examples: Interest only loans are harder to come by, especially for owner-occupiers. And mortgage holidays (you might apply for one of these if you’ve got a cashflow problem and need a short period to regroup) have been cancelled by one bank. That’s two concrete examples of credit being tightened/rationed/whatever you want to call it over and above the LVR restrictions etc.

If banks adjusting their credit criteria has the effect of making it harder for some/many/all people to get a loan and they’ve been consistently making things tougher over a period of time, then that sounds like credit rationing (ahem, I meant credit tightening) to me. What else could you call it?

Why not just say “yes, credit is harder to get now than what it has been in the recent past. But that’s due to RBNZ regulations, implementing the responsible lending code more closely and having to send gazillions back to our Australian parents.” Honesty is attractive.

But, good on them (the banks) for railing against the imposition of Debt-To-Income limits though. I’m glad they’ve done that, clearly there’s some practical thinking people at some level in those institutions.

Want to chat about what this means for you? Get in touch anytime.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn’t claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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