Analysts believe that lenders are moving towards wanting a 20% deposit and it isn't going to get any better in the foreseeable future.
Even people with clean credit records who would normally have no problems obtaining a mortgage are being rejected.
'Things have changed out of all recognition in the past week alone and heaps of loan applicants are being rejected,' said mortgage broker Jeff Cureton-Royle.
Those who have good payment records but don't have a regular income are particularly affected. He said he has one client who is an internationally known commercial artist who wanted to re-finance at 65% if the value of her property but was rejected.
Banks are severely restricting their lending. 'A customer it would have lent to 12 months ago now doesn't get approval. It is no longer standard to get a home loan approved in a few days,' said Chris Eves, a property studies professor at Lincoln University, Christchurch.
Banks are requiring people to provide more documentation and equity than ever before and are effectively 'rationing credit' according to Professor Laurence Murphy of Auckland University's property department.
This is confirmed by one of New Zealand's leading banks. Blair Vernon, BNZ's general manager, said they prefer borrowers able to provide 20% deposits. Those with less can expect to pay an insurance premium or a higher interest rate if their application is accepted.
'It's a price-led rationing, which is delivering to consumers a re-basing of what their expectations are about how cheap credit is going to be. It's not going to be cheap going forward,' he said.
