& Tony Alexander Mortgage Advisers Survey – August 2022

Turning of the tide

Each month we invite mortgage advisers around the country to give insights into developments in the residential real estate market from their unique perspective. Our latest survey, undertaken last week, attracted 68 responses.

The main themes to come through from the statistical and anecdotal responses include these.

  • Advisers report that first home buyers are returning to the market.
  • Investors are still existing, but at the slowest pace since July last year.
  • The fixed rate term preference is near evenly balanced now between one and two years.
  • A firm net 25% of advisers report that banks have become more willing to advance funds.
More or fewer first home buyers looking for mortgage advice
For the first time since August last year our survey has found that more mortgage advisers are reporting increased enquiries from first home buyers than are reporting decreases. In fact, at a net positive 8% the result is the strongest since February 2021 right before Loan to Value Ratio lending restrictions were reintroduced by the Reserve Bank.

The result is the first solid statistical evidence to back up anecdotal reports recently appearing in printed media regarding a few more first home buyers choosing to re-enter the market.

While the monthly survey I run of real estate agents shows that buyers are concerned about high interest rates, access to finance, and prices falling after buying, it appears first home buyers may be focussing on the thing most important to them. That is securing a house to live in and raise a family rather than trying to get the last 5% or so of price declines in the housing market.

Comments on lending to first home buyers submitted by advisers include the following.

  • We are mostly needing to do Kainga Ora First Home Loans as a lot of the banks aren’t doing over 80% LVR lending and if they are, the required surplus is not possible for 80% of clients.
  • Assessors are trying to help, appears the seriousness of the CCCFA rules a year ago has now diminished to a more normal way of assessing, and time frames have dropped to 1-3 days maximum.
  • A trickle of sub-20% lending available. Banks cherry picking the highest income earners.
  • 20% deposit, clean credit history and servicing is now becoming a big issue as the stress test rate is now about 8%. Some pre-approvals that are having to be rolled over after 90 days have had the pre-approval amount reduced.
More or fewer investors looking for mortgage advice?
A net 33% of mortgage advisers this month have reported that they are seeing fewer investors coming forward for mortgage advice. The result strongly suggests a lack of investors in the market. However, the result is the least weak since July last year and is moving in the same direction as that above for first home buyers.

It is likely that some investors are starting to think about the implications of National winning next year’s general election and restoring the ability of investors to deduct interest expenses from gross income. Borrowing costs have also eased slightly and prices have fallen 10% – 15% in many parts of the country.

Comments made by advisers regarding bank lending to investors include the following.

  • Heavy shading is applied to rental income with many also including the property rates and insurances as expenses. Although xxx reduced this shading by 3% this week (to 27% from 30% for properties built before 27th March 2020).
  • Strictly max 60% LVR, assessing all lending on high test rates based on P&I. Rental income is scaled more than it used to be, plus banks are including extra rates and insurance cost in expenses. Does not make it easy to meet affordability criteria.
  • Difference between banks and they way they scale income. Some include rates and insurance as part scaling some don’t – but all scale at similar rates.
  • Investors with several investment homes are just out of the mortgage market. The Banks used to calculate the remaining term on Interest only, once this went to P&I and over the terms remaining for the clients’ loans, this just took them away from the mortgage market and the ability to purchase anything further.
More or less lenders willing to advance funds?

Over the past two months there has been a strong lift in the net proportion of mortgage advisers reporting that banks are becoming more willing to advance funds. Back in June a net 17% reported banks becoming less willing to lend. Now, a net 25% report that lending willingness has risen. This is the strongest result since November 2020 – but does not mean that credit availability is what it was back then.

What time period are most people looking at fixing their interest rate?
Over the past month there has been a strong rise in the proportion of mortgage advisers saying that borrowers prefer the one year term for fixing – from 13% to 42%. This is the highest proportion since May last year.
This shift has come mainly at the expense of preference for fixing two years which has declined to 53% from 82%.
As the next graph shows, very few people are preferring to fix for three years and there is essentially no interest in the four and five year terms.

Download the full report:

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute a financial advice service. The article is only intended to provide education about the New Zealand mortgages and home loans sector. Nothing in this article constitutes a recommendation that any strategy, loan type or mortgage-related service is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making financial decisions, we highly recommend you seek professional advice from someone who is authorised to provide financial advice.

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