Government may cover 15 per cent to 25 per cent of losses from leaky home loan defaults, Bankers' Association says

interest.co.nz

Alex Tarrant

10.03.2011

NZBA CEO Sarah Mehrtens said the Association wanted to clarify the nature of any credit support offered by the government."The credit support which is being offered to banks to support its customers has been represented publicly as a “Crown guarantee”. People commonly perceive a guarantee as being given by someone who, in effect, stands in the shoes of a borrower in case of default. To avoid confusion and unrealistic expectations, we think it is important that consumers know that a guarantee of this nature is not being offered by the Government," Mehrtens said.

"What the Government is offering is to enter into a loss sharing agreement with the Banks in relation to any amounts which are lent to fund the approved cost of leaky home repairs. This means that, in the event of a default, Government should contribute a proportion of any shortfall," she said.