A new home loan deal could be a welcome step towards encouraging more house building, an economist says.
ASB has launched a new 1.79 per cent floating interest rate through a programme called Back My Build, for people who are building a new home or buying a house and land package.
Bank floating rates are generally about 4.5 per cent, although Heartland Bank is offering a special 1.95 per cent.
ASB is using money available under the Reserve Bank’s funding-for-lending programme.
The bank’s executive general manager of retail banking, Craig Sims, said the move would help to create a more sustainable housing market by addressing housing supply issues.
“We’re thrilled to be offering this very sharp interest rate to encourage more customers to consider new build options. Our goal is for Back My Build to result in ASB issuing around a thousand additional new-build home loans in the coming 12 months.
“We’ve deliberately chosen to make the offer available to both owner-occupiers and investors in recognition of the role investors can play in making new, high-quality homes available for Kiwi families.”
Customers will also receive $2000 cash back if they show they intend to build a home with at least six Homestar stars – a measure of green building.
“This is a good move that directs bank lending to new homes rather than trading secondhand houses,” said Rosie Collins, an economist at Sense Partners.
“This is a small step, but any policy to support new builds is good. We desperately need to build more homes to solve our entrenched and worsening housing crisis.
“Most of the lending growth in recent years, particularly over the last year, has been overwhelmingly for buying and selling secondhand houses, rather than building new homes. Lending to construction hasn’t really increased since 2017, even though we need to build more.”
She said the loans could initially fund houses that would be built anyway.
“If the funding-for-lending programme makes it a little cheaper to build new homes, that is a good thing.”
She said the next bottleneck would be councils’ ability to fund infrastructure and new sections.
“As the experience of Canterbury showed after the earthquakes, access to funds is important. But if not matched by releases of new land, housing supply does not keep pace and prices go up.”Infometrics chief forecaster Gareth Kiernan said the new rate could be an indication that ASB was struggling to do as much lending as it wanted to, because of the loan-to-value restrictions.
New builds are exempt from deposit requirements.
“This interest rate might be a way of trying to grow the bank's lending book and expand market share while still meeting regulatory requirements. I certainly haven't seen anything in wholesale markets to suggest that retail rates should still be heading lower,” Kiernan said.
