Young buyers still dominate the market
Each month we invite mortgage advisors around the country to give insights into developments in the residential real estate market from their unique perspective. Our latest survey has attracted 58 responses.
The main themes to come through from the statistical and anecdotal responses include the following.
First home buyers continuing to take advantage of the weak housing market.
Borrowers strongly prefer to fix just one year rather than get the certainty of a slightly higher rate for a longer period of time.
Banks are adjusting their remuneration systems for mortgage brokers and this is causing some angst.
Compared with a month ago, are you seeing more or fewer first home buyers looking for mortgage advice?
For the second month in a row there has been a lift in the net proportion of mortgage brokers around the country saying that they are seeing more first home buyers in the market. The proportion now stands at a net 33% from 19% in September and a low of just 8% in August.
In their comments some brokers have noted that many first home buyers are taking advantage of the current market which involves things such as increased bank willingness to lend, low interest rates, little competition from other buyers, and a good number of listings.
Comments on bank lending to first home buyers submitted by advisors include the following.
Harder to get loan for over 80% LVR.
A little more open to non-bank customers at the moment but otherwise much the same. Some are offering pre-approvals to their own clients also.
Genuine savings, deposit, less rigid on bank statement spending in recent months, account conduct really important.
More scrutiny of employment stability. More lenders requesting employment letters confirming hours, that the role is permanent, etc – probably a sign of the wider labour market.
Compared with a month ago, are you seeing more or fewer investors looking for mortgage advice?
A net 14% of brokers have reported that they are seeing more investors in the market looking to make a purchase. This is up from just 2% last month but still well below levels of earlier this year.
Although financing costs are low and still falling, investors face increases in other important costs including council taxes, maintenance, and insurance. Plus there is a shortage of good tenants and absence of a recent record of acceptable capital gains. Investors overall are not driving the housing market to any great extent.
Comments made by advisors regarding bank lending to investors include the following.
Banks have become fussier on securities, especially multi unit dwellings.
Banks willing to move outside DTI for investors with more restrictive preapproval time frames, but seems to be going above 7x income without too much pushback at all.
No change, although DTIs are having an effect.
Interest rates are now at a level where DTIs are starting to ‘bite’.
Still some confusion on whether banks include rates/body corporate as outgoings for the servicing of new lending. Some do and some don’t.
Compared with a month ago, are you finding lenders more or less willing to advance funds?
A net 33% of mortgage advisors have reported that lenders are becoming more willing to advance funds. This is little changed from last month’s net 31% but is nonetheless the firmest result since March.
Credit is available from lenders – telling us that the missing element is mainly a lack of finance demand overall.
What time period are most people looking at fixing their interest rate?
A strong 82% of mortgage brokers have reported that borrowers are mainly showing a preference for fixing their interest rate for a period of one year or less. There is little demand for fixing longer.
The proportion of brokers noting one year is the preferred term dipped early this year but has since recovered after falls in short rates have exceeded extra declines in the longer-term interest rates.
Fixing for two years was preferred by most people according to 77% of brokers in our April survey. But now, only 6% say this is the preferred term.
Kiwis traditionally fix at whichever term offers the lowest cost. Considerations of where interest rates may go in the future play little role in the decision-making prcess.
Are more property owners asking about refinancing?
A net 17% of advisors this month have said that more property owners are asking about their refinancing options. This is down from 27% last month and the graph shows us that there has been no particular trend in this measure for some time.
However, some brokers have noted that many borrowers have been taking advantage of bank switching deals in the past year.
