Survey sees improvement in the number of mortgage advisers who reported seeing fewer first-home buyers in the market
After retreating from the housing market due to rising interest rates and tight credit availability, “the extent to which first-home buyers are withdrawing has eased somewhat,” a new survey said.
In December, an amended Credit Contract and Consumer Finance Act (CCCFA) came into effect in a bid to protect Kiwis from irresponsible lending. The stricter lending rules required lenders to give greater scrutiny to borrowers’ finances to ensure they can repay loans. This, however, led to complaints that loan applications were getting rejected due to spending habits like takeaways, going to the pub, or seeing a counsellor.
That, along with mounting interest rates in the latter months of 2021, pushed first-home buyers to take a step back from the property market.
A new report from economist Tony Alexander and mortgages.co.nz has found, however, that while first-home buyers continue to be cautious, “the extent to which first home buyers are withdrawing has eased somewhat,” Newshub reported.
According to Alexander’s monthly survey of mortgage advisers across New Zealand, a net 20% of the 75 respondents reported seeing fewer first-home buyers in the market, compared to 65% in February.
“This is a sharp improvement from levels of the past three months and although still negative does bespeak of the stepping back in response to tight credit and rising interest rates perhaps having passed its peak,” the report said.
After concerns were raised regarding the possible unintended consequences of the CCCFA changes, the government has announced a range of tweaks, including not requiring regular savings or investments to be inquired into when lenders assess borrowers' expenses.
Read next: Government tweaks controversial CCCFA lending laws
But the changes won’t come into effect until early June after stakeholders have been consulted.
Alexander’s report found that some advisers were frustrated by this and as a result, won’t be changing the way they assess borrowers’ expenses until June.
“Lenders are perceived to be still becoming less willing to lend,” the report said. “But the extent to which they are easing off credit availability has eased a lot. The credit crunch may have passed its peak, although some banks are tightening rules for assessing investors’ expenses, and some are going to wait until June before altering their rules related to the Credit Contracts and Consumer Finance Act.”
In December, a net 93% of advisers reportedly said banks were less willing to lend. This figure eased to 83% in January, 61% in February, and just 12% in March, Newshub said.
The report said younger buyers “are facing a barrage of factors to try and take into account,” including how far will prices fall, how high will interest rates go, what will be the impact of the soaring cost of living, how many more listings will appear, and if banks will start lending again.
Alexander’s survey also found a change in how mortgage advisers are seeing investors in the market, with a net 51% of advisers reported seeing fewer investors seeking their assistance – the strongest result since November.
“But the improvement from -61% last month is far smaller than the change for first-home buyers and tells us that the stepping back of investors since the March 23 tax announcement of last year remains firmly in place,” the report said.
