Survey also finds that banks are more willing to lend, reveals what time period people are looking at to fix their rates
First-home buyers remained active in the New Zealand residential real estate market, while investors continued to stand back.
This was according to the latest survey from mortgages.co.nz and Tony Alexander Mortgage Advisers, which found that a net 42% of mortgage advisers were seeing more young buyers in the market, compared to 59% in March and just 3% in February.
“This is consistent with what real estate agents are also seeing and likely reflects a number of factors rather than one overwhelming influence,” said Tony Alexander (pictured above), independent economist. Job security remains good, wages are rising, deposits have grown, house prices are much lower, rents however continue to rise, and banks have become more willing to lend.
Alexander is expecting this upsurge in first-home buyer interest to not disappear as quickly as that which happened over September and October last year – unless inflation gets unusually high and the Reserve Bank does some extra tightening of monetary policy.
Some comments from advisers on bank lending are as follow:
- Banks are trying to be creative around CCCFA rules, to loosen up some income servicing criteria so customers can offset high service test rates at present.
- No material change – although policies are loosening slightly around the likes of boarder income amounts that can be used (as an example).
- Less “nit-picking” over small expenses evident.
- Banks more open to First Home Buyers and are already removing the discretionary spending barriers in preparation for the changes to CCCFA in May.
Investors, on the other hand, remained out of the market.
“Few are willing to stretch themselves to pay current high mortgage rates when ability to deduct that expense against rental income is declining courtesy of the tax changes announced in March 2021,” Alexander said.
Here’s what some advisers have got to say regarding bank lending to investors:
- One main bank removed double counting of rental expenses.
- Flexible to 60%, nonbank for over.
- Continue to discount the rental income and then (in most banks cases) further deduct fixed costs. New tax year, so new calculators sent by banks representing the change in interest claimability (IRD).
- Slight change in the rental income % used. Only a small change but positive.
The joint survey also showed that a strongly positive net proportion of mortgage brokers reported that banks are more willing to lend.
“The increased willingness of banks to lend funds likely reflects failure to achieve sales targets in a near-record weak residential real estate market,” Alexander said. “The strong labour market and completion of the expected bulk of this cycle’s decline in house prices are also likely to be playing a role.”
When asked what time period most people are looking at fixing their interest rate, 55% said they were most favourable to a one-year fixed interest rate. That figure was up from 49% in March.
“Preference for the two-year fixing term stepped down in February and has remained close to 40% for three months now,” Alexander said. “The earlier lift in preference for this term likely reflected very intense interest rate fears following the shock inflation number released late in October and then the Reserve Bank’s strong response late-November.”
Preference for fixing three years, meanwhile, remained at zero, as did the preference for five years.
Click here to download the report.
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