Who gets a mortgage?

Press, 3 June 1982, Page 12

Who gets a mortgage?

In Residence

Patricia Herbert PROPERTY REPORTER

Although the availability of mortgage finance has been badly affected by the credit squeeze, the news from the property market is not entirely bleak.

The residential building trade has quickened: the number of permits issued for new dwellings in Canterbury for the year ended March 31 was more than 40 per cent higher than the total for the same period last year. This compares well with the national figures released by the Department of Statistics which reveal an increase of only 32 per cent on the previous year. And the general manager of the Canterbury Savings Bank (Mr F. Dickson) predicts that, although the mortgage market will become tighter before the end of the year, house prices will stabilise.

Mortgage lending in the province is dominated by the Canterbury Savings Bank which showed an investment of more than $9B million in Canterbury, Marlborough, and Nelson and lent a record $9.5 million in April this year.

In the last financial year it advanced 12,575 home loans, and it is now lending at the rate of $8 million a month. The average mortgage invoivesat about $25,000, so that C.S.B.'s lending represents approximately 320 ’ loans monthly. The 1981-1982 lending figures' compare with those for the previous financial year, when the bank advanced almost $64 million in mortgages.

The C. 5.8., as a matter oi policy, confines its investment to Canterbury, .Marlborough. and Nelson says Mr Dickson. C.S.B.'s president (Dr D. J. Janus), commenting in his report for 1981-1982 on “the exceedingly active part the bank was playing in lending," remarked on the performance of its competitors. He said that the C.S.B. was experiencing an "unprecedented' demand" for mortgages because a number ol other financial institutions had “withdrawn almost totally from the market." With the number of applications exceeding the supply of funds, the bank has had to tighten its lending criteria. Preference is given to first home buyers and to those with, established savings records. "We are supporting those who support us,” said Mr Dickson. Applicants are required to have received $lOO interest on deposits for the previous two years before qualifying for loans. Because, for this purpose, interest is calculated at three per cent it is necessary to have had at least $3OOO saved with the bank. However, at a press con-

ference late last month. Mr Dickson said that most applications which satisfied the criteria were successful.

He also pledged the bank's continuing commitment to first home buyers.

The second largest source of home finance in Canterbury is the Housing Corporation.

Unlike other lending institutions, it has not been affected by investment in the inflation proof bonds because it receives its funds in a yearly allocation from the Government.

The corporation's deputy manager in Christchurch. Mr B. Atkins, said that it approved 1670 loans to homebuyers in Christchurch, Ashburton, and Timaru. These loans had a total value of $30.8 million in the last financial year. It was still funding all those applications which met its eligibility requirements, he said.

• The corporation has a weekly income limit of $250 for people wanting to build and for single income families wanting to buy existing properties, and a $2OO weeklyincome limit oh families with two incomes who want to buy. Beyond the C.S.B. and the

Housing Corporation the market is patchy — particularly for first mortgages. The Canterbury Building Society advanced $29.5 million dollars on mortgages in the last financial year - more than 90 per cent of it on home loans and about halt of it in Canterbury.

This represented 1273 loans to home buyers throughout the country. Although it advertises itself as "The Canterbury," it is a national institution with only six of its 21 outlets in the’ province.

It is currently lending $2 million a month nationally, but it has had to tighten its eligibility criteria to cope with demand. To qualify for a loan, applicants must have a threeyear savings history with the society.

Under the terms of its newly introduced “Now" account for home finance, however. members will be eligible for a mortgage advance, after 27 months on an ascending scale based on weekly deposits. The scheme also guarantees them priority when applying for funds. A spokesman for the Countrywide Permanent Building Society said that it was now handling 349 mortgages in Canterbury' with a. total value of more than $3.8 million.

Mortgage applicants are required to have had $2OOO saved with the society for at least a year. $7500 for six months, or $15,000 for three months to qualify for a loan.

The society has introduced a "Fast Track" home loan

account. This entitles subscribers to apply for a home loan worth six times their deposits after three years, and twice their savings after one year. It also offers them preference for loans. The general manager of the New Zealand Permanent Building Society (Mr R. E. Broad) said that it had invested almost $3 million in home loans in Canterbury in the year ended March 31. He indicated that the society was currently lending but that, with the limited supply of funds, "only those with a high priority would be likely to receive immediate favourable consideration.”

The society is only considering applications from supporting members, with a limitation on funds lent ol $40,000 or 70 per cent of the property valuation — which ever is the lesser.

Apart from the ability to service a mortgage, the NewZealand Permanent would expect that an applicant for housing finance would have at least 25 per cent of the amount applied for alreadyinvested with the society, Mr Broad said. Statements from the Bank of New Zealand and the Australia and New Zealand Banking Group (reported. in the last property column) confirmed Dr Janus’ observation that a number of institutions had virtually withdrawn from the market.

And a spokesman for the Commercial Bank of Australia said that its mortgage lending was “very limited.” The loans manager for the Australia and New Zealand Banking Group (Mr W. D. B. Johnson) said that it was being "very selective in its lending" because it had a “much reduced allocation."

He explained that the

bank's ability to lend in the province reflected the fact that deposits in Canterbury were below the national average. The C. 5.8.. which recorded a growth rate of 24 per cent in depositors' funds last year, has been winning custom from its competitors. . This is a part of the explanation for the reduction in the supply of money available from other lending institutions.

The investment of more than $7OO million in the Government's inflation proof bonds, the effects of the frozen interest rates, increased property prices, and social changes which have created an expansion in demand. have also had an impact on the credit market. Both Mr C. S. Jenkins, managing director of the Canterbury Building Society and the C.S.B.'s Mr Dickson said that they suspected that funds were being siphoned from the home lending market to commercial and industrial projects because these returned a greater profit on investments.

Mr Jenkins added that this was not true of the building societies because their > charters restricted commercial speculation to 10 per cent of total assets. However, all four of the banks approached denied that they had increased their investment in the commercial sphere. Mr .Johnson, for example, said that the A.N.Z. had not allocated funds for commercial lending "for some months" and that it was not channelling housing money into commercial invest-. ments. He added, however, that he could see that it might be the case with other institutions.