Lending is seeing a lot of changes currently so here's a breakdown of what to expect.
Currently a bank can only lend up to 15% of its money to owner occupiers with less than a 20% deposit. As of July 1st this rises to 20% so expect more first homes buyers to be able to enter the market, good news for them!
Investors also have some good news, their deposit requirement drops from 35% to 30%, also on July 1st.
These are finally in force as of July 1st and the Reserve Bank sets them at 6 times income for home owners and 7 times for investors. Banks have up to 20% leeway as well so there can be exceptions. With current test rates these DTI's are unlikely to have any impact on how much you can borrow and our calculations indicate they only come into play when interest rates drop to below 5%.
This is now back in play at 80% of the previous amount and goes to 100% in 2025. This means that property investors can claim the interest on their investment mortgages. At the present time this is significant as holding costs for investors are detering many from investing causing a shortage of rental property and so a rise in rents. The average rent across the Country is now over $600 per week, a direct result of investors pulling out of the market in recent times.
The biggie for most of us. The Reserve Bank (RBNZ) is focused on getting inflation under control and their main weapon is keeping interest rates high. Lenders on the other hand are trying to get rates down to stimulate the mortgage market. We have never seen such a 'tug of war' between RBNZ and the market and our view is that the market will start to win in late 2024 and make greater gains in 2025.
We have not seen the impact of this as yet. However with over 130,000 net gain to our population it's only a matter of time and this is perhaps the biggest potential boost to the rental sector. Few of the new migrants will purchase themselves, however they need to live somewhere to live and for most the only option is the private rental market.
ComCom as it's called released a draft report into New Zealand's banking system and its distribution channels. It also made comments around the mortgage Adviser distribution. This part of the report caused outrage within the mortgage Adviser industry and ComCom have been forced to apologise and revise their thought process and report. The fact is that in New Zealand over 60% of bank mortgages are arranged via Advisers whilst in Australia it's over 70%. The main focus of the report however revolves around making it easier to switch banks and products which is a good thing.
Whether you are looking for the first time or refixing or expanding your portfolio it's really important to engage with an Adviser. Why? For starters your own bank will only advise about their products, which may well be the most suitable, but they may not be. Lenders vary significantly in how they assess incomes and debt, there is no one size fits all. When refixing these-days the banks ask you to do it via an App or online. There is no advice process here and many Clients have complained that they need advice and should have it. By going through an Adviser that advice is tailored to your specific needs.
As always we at iLender are here to help, read some of our 425 or so online reviews, we really do make a difference.
Article provided by:
Jeff Royle, Financial Paramedic, jeff@ilender.co.nz
Mobile 021 765 016 | Phone: 0800 536 337, www.ilender.co.nz