US CREDIT CRISIS STARTS TO BITE HERE

I have been astounded over the last few weeks about the number of people who think as a nation we will be isolated from the US credit crisis. We wont be and the trickle down effect has already started.


This from the Herald

The credit crisis that started half a world away is hitting renovators and first-home buyers.

A combination of falling house prices, rising living costs and higher prices for overseas money is forcing banks to tighten their lending policies.

Worst affected will be those borrowing a high proportion of their home's value. But all borrowers now face tougher tests to prove they can pay back a loan.

ASB drastically tightened its lending rules this week, telling brokers that it would generally not lend more than 80 per cent of a home's value.

Its head of retail banking, Ian Park, said ASB would consider applications for more than 80 per cent, "but they will have to be very strong from a servicing perspective".

A year ago, all main banks would lend up to 100 per cent of a home's value.

When house prices were rising and the economy was strong, up to 40 per cent of first-home buyers were getting 100 per cent loans, brokers say.

Massey University banking expert David Tripe said consumer credit had been tightened as banks took a less rosy view of borrowers' prospects.

ASB has also stopped giving "low doc" loans - the credit once advanced to high-earning business people who did not have all the documents to prove their income.

In March, Westpac changed its lending policy to require faster repayment of mortgages that had a high ratio of debt to value.

ANZ and National changed their rules early this year to make it more likely that anyone seeking more than 80 per cent of a home's value would be asked for a registered valuation.