Auckland, November 1, 2021. Those in the market to buy a new home may have a tougher time getting a mortgage approved, a latest mortgage survey
shows.
Feedback from an October survey of 60 nationwide mortgage advisers by Tony Alexander and mortgages.co.nz shows banks are
still willing to lend money - but their assessment of how much money can be borrowed is getting tougher. That includes
how they view income, expenses, spare monthly cash - and deposit size. Independent economist, Tony Alexander, and
mortgages.co.nz collaborate to run a monthly survey of mortgage advisors around the country. Here’s a summary of
findings reported in October 2021.HighlightsNew lending rules make it much harder for first home and low equity borrowersInvestor interest continues to decline, but may be sustained by construction growthWillingness to lend continues to be strong for standard mortgagesThree-year fixed interest rates are now the most popular by farA slight decrease in first home buyer enquiries this month
With Auckland still under Level 3 restrictions, the overall decline in first home buyer interest continues. However, it has almost stabilised with only a net 2% of respondents seeing a further decrease this
month. The expected increase as lockdowns lift will be more restrained than last year with tighter lending rules, higher
interest rates and a growing possibility of overseas travel.Investor enquiries continue to decline
A net 39% of mortgage advisors saw fewer enquiries this month than in August. While this is less pessimistic than the
previous month, the impact of the 23 March announcement clearly continues. Rising interest rates may well see this
negative trend continue for quite some time, despite easing lockdowns. However, growth in construction and less
development restriction in our largest cities are likely to keep investors in the market.Refinancing enquiries continue to grow
A month-on-month increase in requests for refinancing advice continues, albeit at a steadily declining rate since the sudden jump in June. This ongoing activity is likely
driven by the increasing interest rates. Refinancing activity may be further sustained as investors sell one or two
properties to reduce debt or switch to other assets.Willingness to lend remains positive
Despite reports of tighter lending criteria around borrowers’ finances, mortgage advisors are reporting there is still a
good willingness to provide mortgages. This is reassuring, given the changes underway to limit growth in house prices,
such as tax changes and increasing supply.Preference for a three-year fixed mortgage continues to grow
Seventy-seven percent of respondents said most people want a three-year fixed interest rate, up from 57% last month.
This may be due to recent inflation numbers being higher than expected and the Reserve Bank raising the official cash
rate from 0.25% to 0.5%, which signalled the beginning of a longer-term focus. There’s still some interest in the
two-year term, but preference for the one-year term is now almost non-existent.Regional observations
Here’s a selection of the general comments made by mortgage advisors who responded to the monthly survey questions.NorthlandThe Whangarei market is still very active with regular sales in the $1m+ category, despite 11 days of Level 3
restrictions this monthIt’s challenging for first home buyers, but opportunities still existAucklandThere has been an increase in Aucklanders wanting to buy outside the regionMore first home buyer enquiries have been prompted by their landlord sellingA large number of recent policy changes has created differences between banks, which buyers aren’t aware of so they tend
to give up after being declined by one lenderThe less-than-ideal hardship application process is the only option for financially struggling borrowers now that
interest-only and mortgage holidays are no longer availableFear of missing out is still strong, but is increasingly being replaced with ‘can I afford the payments?’Construction finance requirements are tougher, as banks try to minimise time from approval to completion and are wary of
construction costsChanges to the Credit Contracts and Consumer Finance Act (CCCFA) are impacting sensible credit decisions, delaying
credit approval times and creating inconsistent decisionsAt least one main bank is pulling back on mortgage top-ups for funding deposits for non-bank investment property
mortgagesMany buyers say open homes in Level 3 are a nightmare, so they’ll wait until Level 2Bay of PlentyThe market is still very busy and prices continue to climbThere’s a very limited supply of sectionsCCCFA changes are making lenders very cautious, cutting out first home buyers and making owners reluctant to sell as
buying will be more difficultCCCFA changes mean buyers have to show a mortgage is affordable while maintaining existing living standards, so the
traditional Kiwi approach of ‘pay the mortgage and adjust to survive on the rest’ is goneOne lender is applying a debt-to-income calculation to every applicationWaikatoNo banks are offering high LVR lending to new customers, only existing onesOne-year fixed borrowers are breaking and re-fixing for threeHawke’s BayThe CCCFA changes are causing delays to standard approvals due to amount of information now requiredThere’s an increased focus on applicants’ monthly expenses and ability to service a loanWellingtonMonthly expenses are being looked at in fine detail and discretionary spending costs are being counted as normal
expensesLenders are following new CCCFA policy to the letter and not looking at the big picture using common senseSome self-employed people with no debt and a healthy deposit are now having their business debt, including Covid-19
assistance and business vehicle debt, treated as personal debt, so they are no longer able to get a home loanPre-approvals are being reassessed under new rules and there is a looming issue of expiring approvals no longer meeting
new debt servicing requirements, particularly with construction loansLife is difficult for buyers with an ongoing lack of houses for sale, and a chance of pre-approved loans being
reassessed and reduced unless buyers can settle in near futureMore people are seeking finance to renovate or add smaller self-contained units to their properties without subdividingSome banks now want a registered valuation on almost every new mortgage deal, regardless of loan-to-value ratios, which
may be helping them with the new capital requirements that are coming upNelson/TasmanPre-approved low-deposit first home buyers are struggling to find a suitable home that’s similar to the nice home
they’re renting, and they’re not always willing to compromiseSome couples are moving to Christchurch where homes are more affordableCanterburyLow equity borrowing is almost impossible to get unless buyers meet Kāinga Ora criteriaLenders seem to have little appetite for less-than-20% deposit loans for existing propertiesShort-term consumer debt, like Afterpay and Laybuy, needs to be closed for first home buyer or low deposit loansFirst Home Grant price caps almost never work in the current marketOne of the biggest changes, a 150% increase in the required uncommitted monthly income after all regular expenses (UMI),
is mainly affecting first home buyers and seems to be due to the Reserve Bank restricting loans to people with less than
20% depositHouse prices are so high it is hard for first home buyers to buy without help from their parents, as very few qualify
for the First Home GrantPeople who previously had loan approval and have committed to new-build homes are now worried they may no longer meet
the servicing requirement when they come to settle on their purchaseDunedinIt’s now much harder for first home buyers to get a loan with less than 20% depositApproval time is still a big issue with lenders taking 10 or more working days; if they email a question it adds another
three daysTo learn more
Visit mortgages.co.nz to read or download the free full survey report including graphs.