Start Of 2023 Wrap Up
What has the new year brought in terms of finance and property news?
Here is a quick recap of the highlights:
Home Loan Rates While home loan rates have certainly risen in the last year, they could be worse!
They are not keeping pace with the OCR increases.
In the last year, the OCR has increased by 4%, but on average, the one-year fixed-term rate has only increased by 3.68% [source].
The Reserve Bank is predicting further OCR rises, but they may not have to raise it as high as first thought [source].
But, any increase will impact home loan rates, so now is the time to review your current lending before any further increases are implemented.
Cost of Living The news is not great when it comes to the current cost of living.
Inflation has remained stubbornly high at 7.3% which is contributing to increased costs everywhere.
Food prices are up 11.3%, household utilities are up and so are rent prices.
Plus, there is the added worry of when the government might remove the current fuel subsidy.
It certainly is getting harder to cover the cost of everything each month. So, we have assembled some money-saving and budgeting tips that may help…
The reality is, with New Zealand’s rising living costs, your dollars might not be going as far as they used to. So, we’ve put together some handy tips for budgeting:
Track your spending: Keep a record of all your expenses for at least a month to get a clear picture of where your money is going. Then, you can assess which of those costs are necessary and if there are areas where you can save some money.
Set a budget: Once you understand your spending and your necessary costs, set a budget for each category of expenses (e.g., housing, food, transportation). Ensure this stays within your monthly earnings and try to stick to it as closely as possible.
Prioritise expenses: Decide which expenses are necessary and which can be reduced or eliminated. You may also choose to spread some costs throughout the year, like spreading the cost of your Christmas shopping by getting a gift each month to put away.
Reduce unnecessary expenses: Is there anything that you aren’t using anymore but are still paying for? Even cutting back on unused subscriptions, excessive dining out, and some entertainment expenses can make a huge difference.
Save automatically: If you wait for there to be extra funds in your account before saving, you’ll probably be waiting forever! Instead, set up an automatic savings transfer (when your wages come in) from your main account to a separate account each month. Even if it’s a small amount each month, it will add up over time.
Avoid impulse purchases: Make a shopping list and stick to it to avoid impulse buying. Also, if you have the impulse to buy something, sleep on the decision to see if you really need that item or not.
Use cash instead of credit: When your wages come in, take out a set amount of cash that fits within your budget and use that for your spending. Paying with cash can make you more conscious of the amount of money you are going through and can help avoid overspending.
Seek help if needed: If it feels like your finances are getting on top of you, consider reaching out to a financial advisor or budgeting service.
Assess your mortgage payments: Interest rates have been steadily climbing and if you need to refix, chances are, it’s going to be at a higher rate than your current fixed term. Speaking with an experienced mortgage advisor can ensure you get the best rates and mortgage structure for your situation.
Money Saving Ideas Apart from budgeting – there are some other ways that you can save some money.
- Make your lunch, rather than buying it every day
- Buy a keep cup and take a coffee to go from home, rather than stopping in at a cafe daily
- Plan your meals for the week and only buy the ingredients you need to make them
- Use public transport if possible
- Carpool or ride share with colleagues to work
- Regularly review your insurance costs to ensure competitiveness and confirm you aren’t overinsured
If you need to refix your mortgage or perhaps review your mortgage setup or see if there is a better option available for you, then, get in touch with Oliver Broomfield Mortgages 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.