Renters Should See A Mortgage Broker, Not Give Up!

“For many Kiwis soaring rents are having a bigger impact than predictable rising interest rates. In fact, plenty of first-home buyers are discovering that servicing a mortgage can still cost less than paying their landlord rent,” says Tim Kearins, Owner of Century 21 New Zealand.

The Century 21 boss says rents have kicked off the year at an all-time high, with strong demand continuing to hold costs up.

Trade Me’s just-released Rental Price Index for February shows the national median rent experiencing its largest annual increase in seven months, up 8.5% reaching a record-breaking $575 per week.

“Sadly, many young people have stopped going onto the mortgage calculators and put their homeownership dreams on hold. However, for those who can stump up a deposit and prove their ability to service a mortgage, the affordability of borrowing may surprise them. To make it happen, they should also consider getting in a flatmate or boarder,” he says.

Mr Kearins says despite the Government recently tweaking the Credit Contract & Consumer Finance Act (CCCFA) after a serious credit crunch over summer, big retail banks continue to conduct ultra-conservative assessments on all new borrowers. However, prospective property buyers have other options.

He says mortgage brokers like Julius Capilitan of Century 21 Financial do all the running around, delivering competitive rates and greater borrowing flexibility than traditional banks.

Since November last year, no more than 10% of a bank’s total new lending for owner-occupiers can be high Loan-to-Value Ratio loans - defined as loans that are more than 80% of the property’s value. This means at least 90% of borrowers need a 20% deposit or more.

Mr Capilitan says having a 20% deposit significantly helps people’s ability to borrow.

“The LVR tightening has been tough on first-home buyers. There are still loans being offered with a 5% deposit, but the success rate is very low as you need a massive amount of discretionary income to prove serviceability,” says Julius Capilitan.

On a recruitment drive for more Century 21 franchise owners nationwide, Mr Kearins says the support and offering from Century 21 Financial increasingly strengthens his company’s proposition in the local real estate marketplace.

“Brokers and non-bank lenders are busier than ever, helping many disheartened young Kiwis to successfully secure a mortgage. It’s an avenue many overlook but it’s well worth exploring given how tough new lending remains,” Mr Kearins says.

The Reserve Bank’s next Official Cash Rate announcement is on 13 April, which could mark the fourth consecutive OCR hike since October last year.

He says renters shouldn’t be put off by banks or pending interest rate rises. Historically, six or seven percent rates have been about the average for Kiwi borrowers, and New Zealand is still some way off those.

“Despite some headlines, we haven’t hit a buyers’ market yet. Rather, it’s a balance market with many properties still commanding and achieving premium prices. Nonetheless, this autumn we’re seeing more listings and more opportunities for buyers,” says Tim Kearins.

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