Are The Banks Running Out Of Money?

Recently I had a client who wanted to a pay a lump sum off their mortgage and then increase the revolving credit limit by the same amount. Easy you would think, but the bank said NO!

Why? Basically, NZ as a country does not save enough so we must borrow offshore. The banks in NZ have been borrowing roughly $80 billion a year from offshore but that has jumped to around $90b in the last year. The Reserve Bank governor recently said that some of NZ banks were approaching the limits of what they could borrow overseas.

If banks continue to borrow overseas at this rate they will face a credit rating downgrade, forcing up their cost of borrowing and thus increasing mortgage interest rates. To reduce what they need to borrow banks will first start to reduce their customers unused revolving credit limit’s and then get a lot more picky as to which mortgage they will approve and who they will lend to.

Now more than ever good mortgage advice is essential before you talk to the bank!

In the words of the ANZ chief economist “It’s midnight at the bar, we’ve had a few drinks. Do we stay out to 4am and wake up with an almighty hangover, or do we go home? The banking sector now are basically rationing the drinks at the bar”

And by the way I found another option to meet my client’s needs.