The Reserve Bank of New Zealand has a new governor, and he has wasted no time in making his mark and actually using his powers. He is not happy to sit back and do nothing other than confirm the interest rate is going to do what economists said it was going to do the week before.
So he is forcing the banks to restrict lending on property for anyone who has less than a 20% deposit.
Now this does not mean that you cannot get a mortgage if you do not have a 20% deposit. However the banks are to ensure that any lending without that should count for no more than 10% of all their loans. So there is basically going to be a bun fight to be one of the people who can get that money without the required 20% deposit.
I have been seeing some signs of the way things are going for a while now. ANZ has a special interest rate of 4.95% fixed for 1 year if you have a 20% deposit – discounted from 5.25% without this. ASB had a similar offer a while ago, as did Westpac. Most of these also rely on you having your main accounts and a credit card with the bank.
So the upshot is that discounts are now available for people with good deposits or equity.
The main problem is going to be where you raise the deposit from if you cant get one of the lower equity mortgages. If you don’t have the cash, you may end up looking at a “second tier lender” for basically a second mortgage – and that is going to cost extra.
Although the news here is covering this as the plight of the first home buyer – it really affects everyone. If you do not have 20% equity in your property, you are less likely you get the best rates. The bad news for immigrants is that the issue of house prices is often seen as a/ greedy investors using their vast wealth to but yet another house at more than a poor first time buyer can afford (which makes them a pretty poor investor by the way), or b/ bloody foreigners.
So there’s a fair bit of finger pointing and bad feeling about “foreigners” buying property at the moment, and how its all ‘their fault” that people cant afford to buy a house. I would have more sympathy with that if more people didn’t expect to start on the housing ladder half way up I’m afraid. Apparently, the rest of us had it easy!
So anyway – be prepared if you are thinking that buying property here is going to be a/ easy and b/ cheap. I doubt this is going to really affect house prices that much, but it is going to make life a bit more complicated, and more expensive – and its not as if we have cheap interest rates here anyway.