ANZ lifts home loan stress testing rate to 7.6%

The move will further shrink buyer pool and reduce house prices, broker says

ANZ lifts home loan stress testing rate to 7.6%

ANZ, New Zealand’s largest home loan provider, has raised the rate at which it stress tests home loan applicants to 7.6%.

An ANZ spokesperson recently confirmed the increase in the bank’s servicing sensitivity rate from 7.35% and said the stress test was regularly reviewed as interest rates changed.

Rupert Gough, Mortgage Lab chief executive, said the hike since early May, when ANZ’s stress test was at 7.15%, equated to about 4% drop in affordability, which meant anyone who could borrow $1 million six weeks ago could only borrow $960,000 now, all other things equal, Stuff reported.

Read more: ANZ lifts the interest rate it uses to stress test mortgage applicants

“While the change in servicing rate will have a measurable effect on mortgage applicants, house prices do appear to be also retracting slightly,” Gough told the news agency. “It’s likely that the change in borrowing vs. the change in house prices will mean buyers are buying roughly the same property.”

ANZ has recently led the market on lifting stress testing rates, with other banks following suit in raising servicing sensitivity rates.

Read next: Kiwibank increases home loan stress test rate

Glen McLeod, director of Edge Mortgages, said with the Reserve Bank forecasting an OCR peak of 4% by mid-next year, SSRs could reach 9%. The higher the hurdle created by SSRs, McLeod said, the fewer people will qualify for large home loans, which would reduce the buyer pool as well as house prices.

“That could draw them (prices) back as vendors can’t get the price they’re hoping for because purchasers can’t afford to buy at that level,” McLeod told Stuff.

On Tuesday, BNZ announced the increase in its fixed home loan interest rates, with one-year fixed rates moving to 4.85%, and two-year fixed rates to 5.19%, Stuff reported.