The Reserve Bank, which controls all banking in New Zealand, requires lenders to implement new policies on mortgage lending. Recently you may have experienced a delay because of this, or even found yourself turned down for a loan.
Don’t be offended. All lenders need to comply with Reserve Bank instructions, which are designed to take the heat out of the (mostly) Auckland property market.
Here’s what you can expect if you apply for a mortgage in 2017:
- No more interest-only loans. If you own your own home, the Reserve Bank wants you to start repaying the principal. This is actually a good thing!
- Loan to Value Ratios (LVRs). At present you need at least 20% deposit to purchase a property you are going to live in and 40% deposit if you wish to purchase an investment property.
- 90% loans for first time buyers are now a rarity. Unless it is your first home and you qualify for a Welcome Home Loan.
- Cashback offers are very restricted or removed entirely.
- Household expenses are scrutinised. You will have to fill in an expense schedule to prove you can afford your loan repayments.
The highlights of the February – March 2017 period according to the experts are:
- The NZ economy remains in good shape, and the factors that have been helping push up house prices are still evident.
- Strong net migration, high consumer confidence, low mortgage interest rates and a persisting housing shortage in Auckland.
- Dampening influence comes from the latest round of lending restrictions imposed by the Reserve Bank in late 2016.
- As a result, buyer demand has weakened in Auckland, Hamilton and Tauranga. In Wellington and Dunedin buyer demand so far in 2017 has remained strong.
- Values are dropping in Auckland and Hamilton, while most other main centres are no longer increasing in value as they did last year.
- First home buyer activity in Auckland has taken a dramatic downward turn in the first month of 2017, reversing several years of gradual recovery from the GFC.
- In other main centres first home buyer activity has held firm or increased.
- Investor activity has also dropped, but not hugely.