Fewer investors and first home buyers as lending falls 30%
It is harder for brokers to attract new business and there are fewer investors and first home buyers in the market, a mortgage adviser says.
Credit bureau Centrix last week released its May Credit Indicator which found mortgage lending declined 30% year-on-year, while demand for mortgages fell 12% year-on-year.
“In the last six months thing have pulled up quite a bit and we are seeing between 30% to 40% less enquiry in mortgage demand,” said Loan Market mortgage adviser Craig Pope (pictured).
“The CCCFA, tighter LVR restrictions and interest rate rises are spooking people. They are hearing so much doom and gloom from the media.”
Centrix revealed in its report borrowers were being pushed into longer-term mortgages to keep payments as low as they could, with 57% of new mortgages in 2022 issued with 30-year loan terms.
The volume of arrears was increasing across the board as New Zealanders struggled to make repayments as the cost of living continued to rise.
Read more: Home loan lending down by 30% - Centrix report
Pope said as the cost of living increased, more people were scared to make a major financial decision.
“It is the perfect storm for all of those factors,” he said.
“First home buyer lending restrictions are still a major factor as banks are concerned about how much they lend, especially as they are seeing house prices drop.”
Pope said property investing was a calculated decision, so if the numbers did not stack up, investors would look elsewhere.
“Kiwi investors are interested in buying property and are seeing house prices drop, so they could buy a home cheaper now than they could have 12 months ago,” he said.
“The problem is interest rates are rising and people’s cash flow is not as good, so it is harder for these investors to borrow as much money as they could 12 months ago.”
Pope said despite the media’s doom and gloom headlines it was still a good time to purchase a property.
“There are lots of properties on the market and many of them have price guides on them, so it is easier to buy,” he said.
“There are deals to be had and the asking price isn’t always the same as the sale price.”
Read more: Debt-free diva bursts interest rate fear bubble
Pope encouraged his clients to challenge sellers with their price expectations.
“With unemployment so low, people are feeling secure in their jobs and are being sensible with their spending, so I tell my clients not to be afraid to get out there and house hunt. Buyers have more control opposed to sellers in this market,” he said.
“It’s important to negotiate to get the best price as possible. Lots of people are sitting on their hands as money is harder to get and people are spooked.”
Pope said the market was realigning itself after COVID.
“Interest rates cannot stay this low forever, we are on our way to rates returning to where they were pre-pandemic which needs to happen,” he said.
