Offshore mortgage companies used to avoid LVRs
Offshore finance companies are offering a way around strict new low-deposit mortgage rules, and documents obtained by 3 News reveal the Reserve Bank is keeping a close eye on it.
The International Monetary Fund today warned the Auckland housing market is one of the biggest risks to our economy.
Low-deposit mortgages have reduced dramatically since the Reserve Bank introduced restrictions last year, known as LVRs.
But documents obtained under the Official Information Act reveal what it calls “potential leakage”. That is people using offshore mortgage companies, such as Australia-based Resimac, to get around the rules.
The Reserve Bank documents show one offshore loan company had a $49 million increase in loans in December, but blacked out the name.
The new LVR rules have started to cool the Auckland market, with annual house price inflation falling from 17 percent to 14 percent.
But the International Monetary Fund says Auckand’s market is still overheated, and is one of the biggest risks our economy faces.
“The longer you have price inflation in the housing market, the greater the risk,” says Brian Aitken, IMF deputy division chief for Asia and the Pacific.
A well-placed banking source says while offshore mortgage companies are eyeing up the New Zealand market, their main concern is that the LVR restrictions are only temporary. That means the opportunity for these companies to expand here is only limited.
Credit: 3NEWS
