5 Dec 2014

RB's lending restrictions reducing risk

2:51 pm on 5 December 2014

The Reserve Bank is achieving its goal of reducing risk in the banking system by restricting the amount banks can lend in mortgages to people with less than a 20 percent deposit.

The latest bank to reveal its detailed accounts for the September quarter, Westpac, has significantly reduced its risky mortgage lending.

Westpac's accounts show that its total mortgage book grew by $402 million to $39.2 billion in the three months ended September.

However, its lending to people with small deposits shrank by $224 million.

Such lending now accounts for 19.4 percent of Westpac's total mortgage lending, down from 22.8 percent in September last year.

From the beginning of October last year, the Reserve Bank has restricted such lending to no more than 10 percent of net new mortgage lending and it is declining as a proportion of all bank's lending.

ANZ's lending in that area has dropped from nearly 24 percent to 15.5 percent in the past year, while ASB's has fallen from 23.5 percent to just above 20 percent.

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