Interest Rates Are Rising, But What Else Is Happening?

Property Prices Are Trending Down

For a few months now, these updates have included news about property prices falling and this month is no different.

Interest Rates Are Rising, But What Else Is Happening?Recent data shows that both Wellington and the Bay of Plenty now have average asking prices below $1million and property prices are dropping in many other main centres – including Auckland.

This further tip in the market is good for buyers, with spokeswoman Vanessa Williams saying buyers were now less rushed into making decisions.

“We have become accustomed to urgency in the market with multi-offers and high competition being the norm. Right now buyers have more time to do their due diligence and make an educated decision on their future property,” she says [source].

The great news for buyers is that it means you have more time to do research around your home purchase. That can include getting the right mortgage deal in place without feeling rushed. At Oliver Broomfield Mortgage & Insurances, we welcome the opportunity to chat with you and get the mortgage process right.

But, it doesn’t have to be bad news for sellers. There are definitely still buyers out there willing to pay a fair price for a great home. And if you are selling and buying in the same market, then any reduction in selling prices is negated.

House Consents Are Up

While the number of house sales might be declining, the number of people looking to build appears to be increasing.

Figures from Statistics NZ show the number of building consents for March was more than 5000, and a record 50,858 consents were issued in the year up to the end of March 2022.

Interestingly the number of consents for multi-unit dwellings such as townhouses, apartments and retirement village properties also increased and overtook house consents.

This might reflect changes in the development sector and a focus on higher density housing in many of our main centres. Depending on where you live, it may now be possible to subdivide your land and add a multi-unit development like townhouses.

It also presents an opportunity for people looking for investment opportunities to get involved with developments on existing land.

If you are considering property development, especially for multi-unit development, then you need a specialist loan. At Oliver Broomfield Mortgage & Insurances we can give you a range of options from both bank and non-bank lenders.

Rents Increasing Along With Other Costs

Inflation has hit a new high, prices are rising and the cost of living is going up, and it seems that rents are not immune from increases.

The latest data from Trade Me’s Rental Price Index shows rents have increased across the country, rising 7% year on year to the end of March. There were also fewer properties on the market, and demand for tenancies was also dropping. [source]

If you own a rental property you might be tempted to put your rent up, especially if you are facing increased costs of your own. But before you do, think carefully about whether it is the right move.

If your current tenants can’t afford the rent and have to move out, you may find it harder to replace them in the current environment.

If you have a mortgage for your rental property, have a chat with us and see if we can help you restructure or refix it to reduce your costs first.

Changes In The Investment Property Sector?

The New Zealand Property Investors Federation is putting forward ambitious plans to fix what they say is a broken rental sector.

The Federation says that while many believe rental properties are held by big landlords who have many properties in a portfolio, the majority are actually held by people who own just one rental property – often mum and dad investors.

However, they believe investors have been scared off by issues such as the bright-line test changes, increased mortgage costs and tighter lending regulations. Their proposals for investors include returning the bright-line test to two years and making mortgage interest costs a legitimate tax-deductible expense again.

While these changes would no doubt be welcomed, especially by small scale investors, it’s important to remember that they are just proposals by a national body. There is no guarantee that any of their ideas will come to fruition.

Having said that, with falling property prices and a lack of foreign investors, investing in property may be becoming a more attractive option again.

If you’d like to discuss your financial situation and the possibility of getting a mortgage for a rental property, get in touch.

Mortgage Advisers Are Arranging More Loans

Both ANZ and Westpac reported this month that mortgage advisers have originated large proportions of their home loan lending over the past six months.

Both banks said more than half of the loans arranged over the period were arranged with the help of an adviser.

The change was partly attributed to the closure of some branches and less availability of in-house staff due to Covid-19 and lockdowns. But ANZ chief executive Antonia Watson said it was also in part due to a more complicated lending environment, meaning people were often seeking more advice before committing to a loan.

This is good news, as mortgage advisers are now becoming a more integral part of the home loan landscape and banks are likely to see using an adviser as a normal part of the process.

Remember that by using an adviser you usually have access to more options for your home loan, including non-bank lenders, which gives you greater flexibility to choose the right solution for your needs under expert guidance.

Advisers can also help to make sure your home loan remains right for you with yearly reviews and advice on the benefits or otherwise of switching to a new loan type or even a new lender.

If you’d like some assistance with sorting your home loan, give us a call to talk through your options.

If you have questions about any of the ideas raised here or just want financial advice you can trust, get in touch with Oliver Broomfield Mortgage & Insurances today.

Frequently Asked Questions

The advantage of using a mortgage adviser is that they can negotiate with a number of lenders to find the deal that best suits you. They do all the leg work for you, saving you time.

We help assess all your options, whereas the Bank is restricted by being only able to present one view.

While banks expect the client will negotiate with them, or accept the given rate, mortgage brokers are more likely to go to bat for you, to get a lower interest rate.

Our processes make financing your house purchase easy; providing quick personal service that takes the stress out of financing your home loan. With our wealth of experience in the finance industry, we know how to get the best deal for you.

Absolutely! We can still work with you using email, phone calls, and video calls. Whatever your financial situation is, we have a range of options to communicate with you whatever circumstances.

Yes, we have an online application system or a pdf form that can be completed. Supporting documents can either be uploaded directly into our system or emailed. We can use telephone, zoom, or email for further clarification or look at scenarios and receive and send information.

A home loan pre-approval is a conditional approval confirming that we can lend you a certain amount of money, provided the property you purchase meets the lender’s home loan criteria. It’s a good idea to ask us for a home loan pre-approval before you start house hunting. It will help you determine how much you can borrow and to give you some bargaining power when negotiating a purchase price.

Saving a deposit is probably the biggest hurdle for most first home buyers. First home buyers need to have saved at least 5% deposit with 20% or more being the optimum. Remember that this can be made up from a KiwiSaver first home withdrawal and some first home buyers may also be eligible for a HomeStart Grant. Gifts and deed of debts from friends and family are also common.

While there has been a lot of publicity about the need for home buyers to have a 20% deposit; there are still options available for you. We can talk you through what may be available to you including:

  • The ability to access low equity loans
  • Using your Kiwisaver contributions towards your deposit
  • Building your own home
  • Accessing parental assistance to increase your deposit.

The size of your deposit makes a big difference to the interest rate and the other costs you could potentially pay on your home loan. Generally, for lending where the deposit is less than 20%, the lender will also charge a Low Equity Fee (LEF) or Lenders Mortgage Insurance (LMI). Interest rates may also be higher for loans with a low deposit.

Whilst assessing a loan application, banks will scrutinise your bank account (usually the most recent 3 months bank statements).

In particular, they are looking at how well (or not) you manage your account.

Do you have dishonors, and or unauthorised overdrafts?

The better your account conduct the better your chances!

The banks also want to make sure all expenses including fixed and discretionary costs are included in the mortgage application expenses.

This will be determined by your income, your capacity to repay the loan, and the property type along with the current lending restrictions imposed by the reserve bank. Contact us today to find out.

The income you will need to earn will depend on the size of the loan, the bigger your loan the more you will need to earn.

As a rule of thumb if you are a first home buyer who is currently renting and have also been able to save some money there is a good chance you will meet the banks’ income criteria.

A LIM report is a summary of information that the local Counsel hold on a property. The report covers off information regarding consents, permits, code of compliance, potential erosion, subsidence, flooding of any type and the possible presence of hazardous substances. private and public stormwater and sewerage drain, rates, including any overdue rates.

Your solicitor should review this document.

Absolutely, we do this every day for many existing clients. We can use our scenario calculator to ensure you meet lender criteria and affordability for yourself.

Yes, you can borrow money in New Zealand and may be able to borrow up to 80-90% of the purchase price of a home.

To be eligible to for the KiwiSaver First Home Withdrawal Scheme you must:

Be purchasing your first home;

  • Have been a member of KiwiSaver for a minimum of three years;
  • Have your KiwiSaver account with a KiwiSaver provider that allows saving withdrawals; and
  • Intend to live in the property for at least six months
  • We recommend that you contact your KiwiSaver provider and check their individual policy on withdrawals for first homes.
  • If you are eligible to withdraw money from your KiwiSaver, you may also be eligible for a first home deposit subsidy of up to $20,000.00 from Housing New Zealand – known as a HomeStart Grant.

Using a mortgage broker generally means no direct costs to you for their services but there are other unavoidable costs. These may include:

  • A Registered Valuation ($800 – $1,200)
  • Solicitor Costs ($800 – $1,500)
  • LIM report ($150 – $400)
  • Builder’s Report ($100 – $500)
  • Weather Tightness Report for Monoclad houses ($300 – $1,000)
  • Finance fee for non-bank lending (~1%)

Prices can vary. Always request a quote before ordering any of these services. 

The banks all have different policies and risk tolerances. Buyers can get frustrated and waste a lot of time going to banks that won’t suit their needs.

Using a mortgage broker gives you a view of all the banks and their policies. It means you find the right bank faster and with less stress. With a mortgage broker, getting a mortgage isn’t complicated.

It’s about proving you have enough deposit and enough income and then heading to the right bank with that information.

Some tips to making your mortgage application easier: get your documentation sorted early and keep your spending as low as possible in the 3 months leading up to your application.

We will always act in the best interest of the client and will ensure that any deal we broker is the best we can do for the client.

While there can be variances in the amount different lenders pay us we do not favour any particular lender for this reason.

We are also members of NZFSG & Financial Advice New Zealand both of which have ethics that we must adhere to.

We can also be audited at any time by the FMA (Financial Markets Authority)

No… The lenders that use our services see us as an efficient channel to obtain business from. They only pay us on success i.e. when the loan settles.

We sit alongside their other channels such as a bank branch or mobile manager.

The cost of obtaining business from a mortgage broker is comparable to these other channels the banks choose to use.

For this reason, it will cost you no more to use our services.

Mortgage advisers (often called mortgage brokers) are paid by the bank when a mortgage is drawn down.  If that mortgage is discharged (repaid and closed) within a short amount of time – typically 27 months – the broker must repay some or all of the commission (often referred to as a clawback).  In this instance, the mortgage broker has essentially done the work for no pay.

We reserve the right to charge for our time if a clawback is incurred.  The fee will be the estimated amount of hours the mortgage took at an hourly rate of $250 per hour.  Unlike other fees, such as Break Fees from the bank, we have capped the amount we can charge clients at $2,500.

If you are refinancing or selling your house, the best thing to do is immediately talk to your adviser and discuss if any clawback fees will be charged.

If the property is for you to live in, this is something you should discuss with your Lawyer at your initial meeting.  If it will be an Investment Property, you should discuss with your Accountant.  We would also suggest you find a property accountant, someone who deals in property all the time rather than just as a side part of their business.  

Refinancing creates an entirely new mortgage and an opportunity to restructure in a way that better suits your personal situation.

People refinance for lots of personal reasons, from changing circumstances to life goals and interest rates.

People often refinance with us because they want to get ahead faster and take advantage of the smart Go Home Loan structure and personalised support we offer.

The key to an effective loan structure is putting your savings and income into an account that helps reduce the daily interest costs of your mortgage, not a separate unlinked account.

Why? By combining all your income and savings against your Go Home loan, you’re making your money work harder for you.

A Go Home Loan is a much simpler mortgage structure that still uses your income and savings to reduce your daily interest costs.

Generally, banks offset your money from multiple accounts. Some clients find it difficult to track multiple accounts and figure out how much interest is being charged or offset.

We find that using a Go Home Loan is an effective loan structure by putting your savings and income into an account that helps reduce your daily interest costs.

As soon as you have decided to look for a property, the earlier the better.  We recommend a good, early, communication plan with your entire team including your Mortgage Broker, Accountant, and Lawyer/Solicitor