BS2B Section 4.7(a) says that a bank will not be able to classify a loan as a residential mortgage loan (in retail asset class) if it is aware that the borrower owns more than five properties that it gains rental income from.

These loans are to be classified in the SME retail or corporate asset class.

Surprisingly there were only nine submissions, six were from banks, two from representative organisations and one was a private submission.

The Reserve Bank summary  included the argument that “ by not being in the retail asset class, customers would have to be managed on an individual basis which required the bank to obtain more detailed information. That and the higher risk weights could lead to a higher pricing of those loans.”

The two submissions from parties involved in property investment activity also highlighted concerns about the potential for an increase in the cost of residential property loans for investors with five or more properties.

Most of the arguments raised however were around the technical difficulties banks would have in implementing the rule.

The Reserve Bank has consequently decided to “ postpone the implementation of the capital treatment of customers who own and let out multiple properties  i.e. property investors, until December 2014.” Originally the changes were timetabled to come into force from 1 July 14.