& Tony Alexander Mortgage Advisers Survey – January 2024

First home buyers back

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 this week, attracted 56 responses.

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

  • Banks are slightly easing lending criteria for first home buyers.
  • Anticipation of more buyers coming forward is encouraging some people to try and make their purchase now rather than waiting.
More or fewer first home buyers looking for mortgage advice

In our first survey for the year a net 38% of advisors have reported that they are seeing more first home buyers looking for advice. This is up from a net 21% in December and 35% in November, suggesting that the December dip was simply a pre-Christmas stepping back.

Now, with people returning from holidays and evidence of markets rising and interest rates slowly falling with more declines expected, young buyers are showing renewed interest in making a property purchase.

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

  • No Change. Still limited low deposit funds available. No pre-approvals.
  • Banks seem more willing to workshop deals and have them work, I think they are keen to get business done and locked in before rates start to come down.
  • Some are open to negotiate the surplus income required per month – if it’s a strong deal otherwise it’s worth submitting. Xxx bank in particular is lenient with boarders and will allow 2 for over 80% LVR which is really helpful to FHB reliant on boarder income that don’t meet Homes & Communities FHL criteria.
  • Inclusion of boarder income in high LVR loans has been helpful, especially for individual purchasers.
More or fewer investors looking for mortgage advice?

Whereas our surveyed revealed a dip in first home buying interest pre-Xmas and now a recovery, for investors the pattern is the opposite.

A net 29% of our survey respondents have said that they are seeing more investors coming in for advice. This is down from a net 42% in the December survey but about the same as November’s 31%.

Investors are still struggling to make the numbers work with high cost increases and high interest rates, and banks are showing little new enthusiasm for lending to investors as yet. But tax rule changes are being greeted positively and this may bring more interest forward as the year progresses. There is no evidence of a wave of new investors appearing as such.

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

  • Previously banks shaded the rental income by 20% to allow for Rates, insurances, prop management fees and the possible tax liability on the non-tax deductibility and vacancy. with the introductions of deductibility and the banks now requiring the actual rates and insurance cost to be included in the expenses, The banks have reduced the shading, however, it seems the banks are overly conservative for investment proposals.
  • Still very difficult to get the numbers to stack up, but the banks are easing their criteria slowly but surely.
  • Not much change yet, but expect some as the year progresses. Interest rates are still prohibitive for a lot of existing investors.
More or less lenders willing to advance funds?

A net 36% of respondents this month have reported that lenders are becoming more willing to advance finance. This outcome is broadly consistent with others since March last year and evident in the comments which brokers have submitted regarding changes in bank lending criteria.

No broker however has indicated that banks are falling over themselves to advance funds. Caution continues to prevail, but the direction of change is positive – if slow.

What time period are most people looking at fixing their interest rate?
Almost 80% of brokers have reported that borrowers prefer to fix their mortgage interest rate for one year or less. This would capture the rise in interest in fixing just six months evident in media discussion about market trends amidst expectations of interest rates falling this year.
The preference for fixing one year or less is at the highest levels since days of the pandemic frenzy when these short rates were exceptionally low near 2.3%. Currently they are just under 7% by and large.
Interest in fixing two years has almost disappeared. Maybe that is why some banks have cut their two year rates. It looks like they are doing borrowers a favour – but the rate is irrelevant for almost everybody.
No demand exists for the three year fixed rate.
Are more property owners asking about refinancing?
A net 23% of brokers say that they are seeing more people looking for advice on refinancing their existing mortgage. This result, like that for December, is on the low side compared with most months in 2023.

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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