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Banks Not Likely To Ask For Money Back

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Oct 1 NZPA - Banks are highly unlikely to ask for their money back from homeowners who are meeting their mortgage payments, according to analysts.

There has been speculation that the global credit crisis will make banks uncomfortable with large home loans and require people to have more equity in their home.

Economist Gareth Morgan told The Dominion Post that there would be a shift away from "unbridled lending".

If people had borrowed 90 percent of their house price, they could expect their bank to demand that was cut to 80 percent.

Analysts said banks were highly unlikely to ask people to pay some of their debt back or sell their house when they are meeting mortgage repayments because it would damage the relationship with the customer too much.

"If some one is paying their loan why on earth would you want to," said David Tripe, director of the Centre for Banking Studies at Massey University.

"It doesn't make any sense at all," he said.

Mr Tripe said if people are in arrears with their mortgage they should talk to their bank because it was better for all concerned if the payments could be restructured rather than sell the house in a falling market.

"If you are a borrower in trouble talk to the lender, don't hide," he said.

The rate of demand for home loans was likely to slow in the current environment, reducing the amount of money banks needed to raise in international markets to lend out.

New Zealand banks get about a third of their funding from offshore and are having to pay more for that funding in the global credit crisis.

Bank of New Zealand head of research Stephen Toplis said there may be pressure to renegotiate corporate loans when they roll over but it was over the top to suggest banks would say to existing home owner customers we don't want to lend you as much in this environment.

"In the housing market it would be highly unlikely, it would send all the wrong sorts of signals," he said.

In home lending banks looked at the value of the home as well as the ability to pay the loan but the latter was the most important.

NZPA WGT pjg kn

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