Just as New Zealand banks are being forced to tighten their lending criteria, Australian institutions appear to be loosening their belts.
Financial comparison website RateCity says about three quarters of home loans being offered in Australia now require a mere five per cent deposit or less, terms not seen since the aftermath of the 2008-2009 global financial crisis.
"Many more potential borrowers are eligible for loans that may not have been approved in the past," RateCity chief executive Alex Parsons said in a statement on Tuesday.
He says 73 per cent of local lenders have increased the loan to value ratio (LVR) on mortgages to 95 per cent or higher, requiring a five per cent deposit or less.
The LVR is the maximum mortgage offered as a percentage of a property's value.
Only 68 per cent of loans offered last year had such a high LVR. It dropped as low as 49 per cent in 2010 after the GFC.
In contrast, the Reserve Bank of New Zealand from October 1 is requiring its banks to restrict high LVR mortgages in an attempt to take the heat out of New Zealand's property market.
This will limit NZ banks to offering 10 per cent of their home loan portfolio in high LVR mortgages - considered to be 80 per cent or more.
It aims to limit house prices and credit, while keeping interest rates low to support the overall economy.
Macquarie Research senior economist Brian Redican doubts these so-called "macro prudential rules" will be introduced in Australia, at least in the short term.
"If, however, NZ's adoption of macro prudential policy is deemed a success - and Australian house prices accelerate further - then it is possible that similar rules could be adopted in Australia in late 2014 or 2015," Mr Redican said in a note to clients.
Reserve Bank of Australia assistant governor Malcolm Edey hosed down talk of a house price bubble in Australia at a conference last week, suggesting such talk was "unrealistically alarmist".
Mr Parsons warned that while there is a temptation to jump into the market if an institution will lend you 95 per cent of the property's value, it would almost certainly mean having to pay Lenders Mortgage Insurance because of the small deposit.
"Any increase in interest rates, or a reduction in your income, has a much bigger impact because you have a larger mortgage," he said.
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