More Changes to the CCCFA?
In case you haven’t heard enough about the Credit Contracts and Consumer Finance Act yet, more changes to the beleaguered legislation are likely to happen!
A second stage of proposed changes is being considered by the Minister of Commerce and Consumer Affairs, David Clark, with an announcement expected in the next few weeks before submissions open to the lending industry. [source]
The first lot of reforms, which included the removal of some criticised elements from a borrower’s list of expenses, were implemented in July.
But these changes have since been criticised for not going far enough.
We’ll just have to wait and see if the second round of changes makes it easier for people to get home loans again.
New Home Loans Are Proving More Difficult for Low Deposit Customers
Two major banks, ASB and ANZ, have announced that they are temporarily stopping offering home loans to people with less than a 20% deposit or a loan to value ratio (LVR) of 80%. [source]
Why have they made this decision? Well, it is likely because The Reserve Bank of New Zealand says banks must have no more than 10% of owner-occupied mortgage lending at an LVR of 80% or more.
An ASB spokesperson said the bank currently had “a full pipeline of customers who are pre-approved for a home loan with an LVR above 80%” Therefore, the bank had paused any new applications to meet the Reserve Bank’s criteria.
But it doesn’t mean all hope is lost if you are struggling to get together a deposit of more than 20%.
Several of the major banks have said they are still offering high LVR loans, and there are lots of other lenders that are worth exploring.
There may also be options to help you reach your deposit goal, such as using part of your KiwiSaver and possibly the first home buyers’ grants.
Working with a mortgage adviser can help you get a good handle on your available finances and give you access to a wider range of lenders than just talking to the main banks, so get in touch to discuss your options.
Banks Reducing Home Loan Rates and Increasing Savings Rates
The last few months have seen us announce nothing but increases in mortgage rates.
This month is a little different!
A number of banks have actually reduced their fixed rates for one- and two-year terms.
Major banks including ANZ, Westpac, BNZ and ASB all reduced their rates after changes in international market trends. [source]
If you are due to renew your fixed term mortgage it might be worth shopping around to see if you can get a better deal.
If you aren’t due to renew but think another lender might offer a better option, then you can investigate whether the break fee for your current lender is worth it.
We can help you explore your options and do the maths to work out the best deal for you.
It’s worth noting that some banks have also raised term deposit rates. Kiwi bank was offering 4% for a one-year term deposit, a rate not seen for some years. [source]
In the current financial climate you might not want to invest money for longer than a year or two so it’s worth keeping an eye on these rates if you are looking for an investment.
House Values Are Still Dropping in Value
The fact that house prices are dropping has become such a regular trend that it is hardly news anymore, but the latest figures from the QV House Price Index show that property is still reducing in value.
The average value of a New Zealand home has dropped 3.4% over the three months to June and down 4.9% since the beginning of the year.
Only Queenstown has shown an increase in value. [source]
While lower prices should make it easier for buyers, there are a range of other issues to consider.
These include getting a deposit, the CCCFA and higher mortgage rates, so it can still make things difficult for buyers.
The best thing to do is speak to an experienced mortgage broker so they can assess your individual circumstances and provide tailored advice.
Is The Rental Market Losing Its Buoyancy?
Rental properties have proven to be a good investment in the past few years with demand high and owners able to charge above-market rents.
But the latest figures from Trade Me’s rental price index show demand is falling and more properties are becoming available.
Figures show that year on year for May, the number of properties listed was up 12% but the demand fell by 8%. Rents have also dropped for the first time in 2022.
Trade Me Sales Director Gavin Lloyd predicted that landlords might need to start cutting rents dramatically if the situation continues. [source]
If you own investment properties, especially if you have a mortgage on them, then it’s probably worth looking at your position now.
That way, you can be prepared should you need to find new tenants or change your rent.
Again, this is something that our experienced mortgage brokers can help you explore. Get in touch with our team today to discuss your investment options.
Get in touch with us today for an obligation-free chat about your next move – Oliver Broomfield Mortgage & Insurances
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.