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Good news: lending rules are loosening
Finally, some good news for first home buyers. We can all agree that pulling together a 20% deposit for a house, especially in the Auckland market is no easy feat. It’s probably the biggest obstacle to overcome when starting the house hunt.
The Reserve Bank of New Zealand has recognised this, and announced this morning that they’re loosening their lending rules. At the moment, the rule is that no more than 10% of loans can go to owner occupiers with a deposit of less than 20%. From this January however, that rule will be no more than 15% of loans can go to owner occupiers with a deposit of less than 20%.
What that means is 50% more first home buyers with deposits less than 20% will be able to get approved for a mortgage. Banks are still tough on servicing and affordability so it won't make it any easier to borrow more. It will simply help those with good incomes and smaller deposits who were otherwise running into the frustration of banks not being able to approve loans due to limited credit availability.
We see this as a sensible change for the RBNZ given the limited credit availability we’ve seen from banks for loans that have an LVR (loan-to-value-ratio) of more than 80%.
This is going to open the door for more clients, so if you've got a 10% deposit and strong income it’s time to start planning. Chat to us if you’ve got any questions, or think you might be in the market as part of the 15%.
For investors the restriction will move from a required 40% deposit to 35% deposit. That won't help much when you're buying a property, but will mean you can hold onto more cash when you sell. We'd be happy to chat through your investment plan as well, so don't hesitate to give us a call.
Work out how much you can borrow.
Give Alan, our first home buyer chat bot a whirl! He takes his mission of helping first home buyers very seriously. Ask him things like "how much can I borrow?" or "what's the latest interest rates?" or just ask him to tell you a joke. Start chatting to Alan. You can also find out how much you can borrow and what your repayments would be using our mortgage calculators.
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The opinions expressed in this article should not be taken as financial advice, or a recommendation of any financial product. Squirrel shall not be liable or responsible for any information, omissions, or errors present. Any commentary provided are the personal views of the author and are not necessarily representative of the views and opinions of Squirrel. We recommend seeking professional investment and/or mortgage advice before taking any action.
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