Coronavirus fears that mortgage credit could cause a credit crisis

Homebuyers employed in sectors made nervous by the coronavirus could soon face a battle for loans as banks minimize their financial exposure to the pandemic.

This week a long-time employee of Air NZ had a
loan for an investment property questioned by their bank in what a major mortgage broker feared was a sign the coronavirus was about to bite Auckland’s scorching property market.

Bruce Patten, of Loan Market Mortgage Advisers, said the Air NZ worker was otherwise an ideal candidate for a home loan, paid a good salary and had worked for the airline for 25 years .

They also already had their own house.

Still, the bank had been concerned about a recent reduction in working hours because of the coronavirus, Patten said.

It also came as another lender this week terminated a $250,000 business loan to an adventure tourism company – despite having previously approved it – and the restaurants had harder to get loans, he said.

“Everyone suddenly becomes risk averse, but I’m afraid it’s a bit of a knee-jerk reaction,” he said.

It comes as house prices in Auckland have been boiling since last spring and still show few signs of slowing down, despite the looming threat of coronavirus.

Auckland’s median sale price hit record highs when it hit $880,000 in February, the city’s highest price in more than four years, according to the latest data from the Real Estate Institute.

Patten said his mortgage brokerage team helped clients secure $1 billion in home loans in January in a record high for his business, while Kris Pedersen of Kris Pedersen Mortgages also reported a near-record opening of the year.

Yet news of Italy being forced into a lockdown to contain its coronavirus outbreak and the cancellation of major sporting events has property pundits wary of how quickly the economic impact could hit. .

READ MORE:
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• On the rebound: Auckland property prices jump the biggest in two years
• Westpac revises its forecast for rising house prices and expects 10% growth
• Property price increases hit new annual records, regions hardest hit

Airline executives had notably taken temporary pay cuts, while a wide range of New Zealand companies had now implemented travel and pay freezes for staff.

Westpac chief economist Dominick Stephens has now swung the coronavirus to halt house prices in the second quarter of the year, or even plummet, as people fear for their jobs or take a wait-and-see approach on home purchases.

Yet he also believed the effects of the virus would be short-lived and house price growth would return later in the year.

Pedersen said he expected banks to monitor the situation closely and thought the self-employed might have a harder time getting home loans, especially if they were tied to the tourism, manufacturing sectors. or primary production affected by the coronavirus.

However, he had yet to hear of banks rejecting repeat customers, as lenders had instead increased their staff to cope with the huge volume of home loan applications they were receiving.

“I wouldn’t say the standard app we got into was affected by coronavirus as a reason,” he said.

“But it’s difficult with everything moving so fast – that could change.”