Westpac New Zealand and ANZ have tightened lending to non-resident mortgage borrowers to reduce risk in New Zealand's booming housing market.

Westpac will no longer lend to non-resident borrowers paying off mortgages with overseas income, and borrowers on temporary resident visas would only be accepted if they have a local address and New Zealand-based income, a spokeswoman for the bank said.

ANZ would require non-New Zealanders using overseas income to live in the properties they purchased.

ASB said it had reviewed its policies concerning the treatment of overseas income in applications and it would no longer be considered when the customer did not have citizenship or permanent residency. "We continue to consider applications from customers without New Zealand citizenship or permanent residency where overseas income does not form part of the application, subject to certain conditions."

BNZ has said it would not loan to people with foreign income who were not New Zealand or Australian citizens or did not hold a current permanent residency visa, regardless of whether or not they reside in New Zealand.

The move came as the country's central bank reiterated that it was concerned about the hot housing market's risks to financial stability. It held interest rates steady at 2.25 percent partly to avoid stoking the country's housing market any further.

New Zealand's rate of house price growth is second only to Qatar's, according to the International Monetary Fund, due in large part to low interest rates and an influx of foreign investors and migration. The central bank had implemented a variety of measures to cool New Zealand's housing market, including imposing curbs on lending and is looking at other methods.

Westpac NZ has also reduced the acceptable loan-to-value ratio for domestic applicants with foreign incomes to 70 percent of the loan from 85 percent. The banks tightened policies in response to concerns of Australian regulators seeking to control a steep jump in urban property prices and to address concerns over lax lending standards.

Property commentator Olly Newland said the banks were doing the Reserve Bank's job for it and allowing the Government to avoid getting its hands dirty with any moves against foreign purchasers. "It's very elegant," he said. But he said the moves were unlikely to have a significant impact because those who wanted to would find a way around them.

Sources: Reuters | Stuff.co.nz