Home buyers with low deposits are being warned to be cautious about buying at auction if they are unable to get pre-approvals for their home loan under new Reserve Bank rules.
From next week, banks can give no more than 10% of their lending to people with deposits of less than 20%.
The publisher of the New Zealand Property Investor magazine and the Bankers Association both believe banks will be reluctant to issue pre-approval for low equity loans.
The Real Estate Institute says interest rates and fees may not be favourable for low equity buyers and people risk a nasty surprise if they are not clear about the costs or the kind of property they can bid on.
The Bankers Association says people should talk to their bank so they know exactly how much they can spend and what kind of property they should be considering, especially at auction.
Chief executive Kirk Hope says says those buying at auction in particular need certainty about what they can spend.