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    There has been a lot of press regarding the RBNZ’s proposed capital reserving requirements for the banks. In short, the big 4 may have to move from an average of 10% to 16% of their asset book and while that does not seem a lot it will mean billions of capital that can’t be used in funding NZ’s infrastructure and housing development needs. And while the debate is only just heating up between RBNZ, the government and the banks, attention is turning to what the banks may do to meet any increase in their required capital reserves.

    Westpac has been public is saying that interest rates will rise to cover the margins not being received on the capital, ANZ has said it will review the size of its operations in New Zealand and of course, ultimately all banks can recall the lending it has with customers. In a small but significant way, this is beginning to happen. It does not all need to come from their parents and it is hardly going to come from deposit funds with low-interest rates.

    Most recently we have seen lenders restrict Interest Only mortgages to 3 years (down from 5 years) and there is no appetite to roll over any IO past the fixed term instead lenders are forcing customers into principle repayments. This is another way banks are increasing their capital reserves but no one is talking about it. If you have an Interest Only mortgage and you are not sure what your options are, come and talk to Global Finance. We have access to a full range of non-bank lenders that may be just right for you and your investment portfolio.