Bank of New Zealand has stepped up its riskier mortgage lending ahead of Reserve Bank restrictions on lending to customers with a deposit of less than 20%.
The latest disclosure statement from BNZ, which is owned by National Australia Bank, shows 47% of its net new mortgage lending in the June quarter was to people with a deposit of less than 20%.
BNZ's mortgage book grew by $371 million in the three months to the end of June, down from the $455 million it lent in the March quarter.
It lent $174 million dollars to people with a deposit of less than 20% and $110 million of that was to people with a deposit of less than 10%.
That's up from the $86 million it lent in the March quarter to people with a deposit of less than 10%.
In May, chief executive Andrew Thorburn said BNZ is not part of the problem of risky mortgage lending which has been worrying the Reserve Bank.
Earlier this week, the Reserve Bank gave banks that lend mortgages six weeks notice that, from 1 October, no more than 10% of their new mortgages by value can be to customers with deposits of less than 20%.
Reserve Bank Governor Graeme Wheeler said he is concerned at the rate at which house prices are rising and the potential risks this poses to the financial system and the broader economy.
While BNZ has clearly stepped up the amount of its riskier lending, it's still way behind ASB Bank which lent 73% of its net new mortgage lending in the June quarter to people with less than a 20% deposit.
The other two major banks are lending far less to such people. ANZ, the largest bank, lent only about 3% of its net new mortgage lending to them in the June quarter while Westpac lent less than 1% of its net new lending to them.
Massey University head of banking studies David Tripe said mortgages are not as important to BNZ's business so it will have less difficulty complying with the new rules than ASB will have.
He said because ASB is well represented in the Auckland market, it suggests that there may be a higher proportion of over 80% lending in the Auckland market compared to the rest of the country.
Dr Tripe said the new rules will force ASB to win customers to their lending products for reasons other than being willing to do high loan to value ratios.
He said that may entail being sharper on the pricing, for example some of ASB's competitors have offered more attractive interest rates to borrowers who want relatively lower loan amounts relative to the property value.