Autumn brings cooler mornings and evenings, but is it also bringing a cooler property market with it?
We’ve definitely seen a shift in the way the market is behaving.
But, what does that mean for you?
And, what impact has the change in lending regulations had on New Zealanders?
Let’s explore the answers to those questions now.
Interest Rate Update
It wouldn’t be a monthly roundup without some information about what interest rates are currently doing! So, here is the lowdown:
Longer-term interest rates are continuing to rise. Back in March 2021, the average 5-year rate was 3.78%, in February this year, it was 5.47%. Now, the main banks have 5-year rates between 5.69% and 6.09%.
With rates trending upwards, it is definitely time to consider what this means for your repayments. “For borrowers with a $500,000 home loan, the difference between those two rates is just over $220 a fortnight, on a 25-year loan term.” [source]
The best thing to do is to seek advice from an experienced mortgage broker, like the team here at Oliver Broomfield Mortgage & Insurances. We can help you look at your current financial situation and how any rate changes could affect your repayments.
CCCFA Drafted Changes Revealed
According to credit reporting agency Centrix, mortgage applications are down 19% year-on-year. Inflation, rate hikes, new lending restrictions and uncertainty over Omicron were all highlighted as reasons. [source]
Particular mention was made of the Credit Contracts and Consumer Finance Act (CCCFA) which, as we’ve previously highlighted, has caused some issues with lending applications. Currently, under review, the proposed changes have been drafted:
- Excluding savings and investments from “listed outgoings”
- Living expenses are benchmarked against statistical data rather than the need to trawl through bank statements
- More trust that borrowers will modify their spending if needed to meet mortgage obligations (as they have always done in the past)
- Other changes refer to issues like a borrowers’ ‘reasonable surplus’, and any ‘obvious’ affordability of a loan
If you are feeling uncertain about your ability to get your mortgage application approved then getting advice from an independent broker can help.
We can recommend a range of options for you and access a number of different lenders.
Are Major Centres Becoming Buyer’s Markets?
We’ve definitely seen house prices skyrocket in the last year. But, after a period of very high prices and difficulty for some home buyers, the latest figures are starting to paint a different picture. They show the market is continuing a downward trend.
Data from realestate.co.nz shows properties in Wellington are taking longer to sell, and sales have also slowed in Auckland. Stock levels are up in most regions which suggest more properties on the market for buyers to choose from.
However, the number of new listings dropped, perhaps as a result of uncertainty over Covid and inflation.
“When inventory is higher than the 15-year long-term average, it shows there is more stock than people buying property,” says realestate spokeswoman Vanessa Williams.
“Theoretically, if no new listings came on to the Wellington region market and all existing stock was sold, there would be no houses available to buy in 17 weeks which is longer than the long-term average 15 weeks.” [source]
The last Wellington was a buyer’s market according to realestate.co.nz was back in June 2014.
Is The Property Market Trending Down?
The latest QV House Price Index also shows the property market is heading down, with the national average value declining for the second month in a row. Ten of the 16 cities and districts measured had a decline, up from just four in January.
While these reports might be encouraging for buyers, property prices are still high. The real estate report notes that average sale prices are still above $1million and demand is still high.
So, what does it all mean? With the borders reopening to certain countries soon and eventually the rest of the world, we aren’t sure what the impact will be. We may see an effect on property prices if Kiwis overseas decide to move back home.
What we do know is that now might be a good time to start looking for a new home, especially if you are trying to get on the property ladder.
If you’d like advice from an experienced mortgage broker to get your options sorted, get in touch.
Are You Leaving Yourself Short For Retirement?
Using part of your KiwiSaver funds has become a common way to afford a new home, particularly for younger people.
But new research carried out on behalf of Te Ara Ahunga Ora, the Retirement Commission, reveals that some younger New Zealanders could be leaving themselves short when it comes to retirement funds. The research used modelling to compare what a person might have in the KiwiSaver after 14 years compared to actual average balances. The difference was many thousands of dollars. [source]
Part of the deficit was attributed to people withdrawing savings early to put towards a first home. Figures from Inland Revenue show that withdrawals for a first home have been increasing year on year.
The lesson to be learned here is that finances need careful planning. While the ability to withdraw from KiwiSaver to buy a home is a great option and has helped many people, it’s important to have a plan for how you will grow your retirement fund again to compensate.
It’s also vital to make sure you are getting the best value out of your mortgage both when you first buy and in the future if your circumstances change.
If you’d like to chat about your mortgage – whether you are looking to buy your first home or want to make sure you still have the best product for your current circumstances, give us a call, and we’ll be happy to chat.
So, depending on your situation, it is always best to seek advice from a mortgage broker to ensure you are making the right move for your individual situation.
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.
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.