What’s happening in the lending space?

A recent report suggests New Zealand is clamping down on home loan lending, with their central bank aiming to slap new restrictions on the housing market, after warning that speculation is helping to fuel huge post-pandemic price gains. The changes will aim to reintroduce loan to value restrictions, requiring investors from the 1st of May to have a 40% deposit for the purchase of investment properties. There is speculation is that something similar could come to Australia after property values in smaller cities and regional Australia have risen to new heights, fueled by record-low borrowing costs, stimulus payments and low stock levels.

Property, in both Australia and New Zealand, has benefited from the cut in central bank interest rates to near zero and government stimulus efforts that have injected billions into the economies, and the figures confirm it. CoreLogic’s index of dwelling values rose 0.9 per cent in January from December, and was up 3 per cent year on year, as the 1.6 per cent monthly jump in regional prices more than doubled the 0.7 per cent increase across the combined average of capital cities.

The Reserve Bank of New Zealand deputy Governor, Geoff Bascand said “Due to the success of the health and economic policy responses, we have witnessed a rapid acceleration in the housing market, with new records being set for the national median price, and new mortgage lending continuing at a strong pace…We are now concerned about the risk a sharp correction in the housing market poses for financial stability. There is evidence of a speculative dynamic emerging with many buyers becoming highly leveraged.”

With house prices back on the rise and showing no signs of slowing, a recent Domain report has suggested the demand or guarantor home loans is on the rise, as parents help their children get a start on the property ladder. Mortgage brokers have reported that guarantor loans, which enable first-home buyers to avoid lenders mortgage insurance when buying with less than a 20 per cent deposit, have been climbing since September; a trend driven more by parents rather than adult children. Mortgage Broker, James Algar, of Mortgage Choice informed he had many parents joining clients on their first meeting and say “what do we need to do to get them in the market now.” A concern that first home buyers could miss their chance to buy if they do not act now has been regarded a key motivator, and increased confidence in the market, with parent’s equity in property a safer bet in their point of view, appears to have made more parents comfortable to go guarantor.

If you would like to take advantage of current market conditions, if you would like some assistance with buying, or just want some advice, reach out to us so we can help!