Pullback from the war shock continues
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 57 responses.
The main themes to come through from the statistical and anecdotal responses include the following.
While investors remain on the sidelines compared with past levels of activity, first home buyers are increasingly dominant.
Bank financing is not a significant issue and willingness to lend has been good since early-2023.
Borrowers strongly favour the two year period for fixing their mortgage interest rate.
Compared with a month ago, are you seeing more or fewer first home buyers looking for mortgage advice?
Since falling away strongly following the onset of war in the Middle East at the end of February there has been a lessening of the withdrawal of first home buyers from the housing market.
This month only a net 5% of mortgage advisors have reported that they are seeing fewer young people in the market. This is an improvement from a net 12% in July and the low of 54% seen in April.
Evidence from my other surveys shows that first time buyers remain the dominant force in New Zealand’s housing market.
Comments on bank lending to first home buyers submitted by advisors in this month’s survey include the following.
They are still there and active but lack of urgency and slow to progress.
Status quo – Banks are keen and the offers are widely known and similar across the banks that want to be in this space. Affordability is the key test and barrier; turnaround is good for easy deals from a few banks that support the adviser channel. Property quality can be a barrier with some banks asking more questions than others over this in regard to maintenance and insurance cover without exceptions.
We are struggling with some of the banks needing a large amount of upfront information that is unnecessary & clearly just box ticking. There are other providers who are very keen to be supporting these buyers – so the business is going there.
No major changes. The Kainga Ora program is working well for a number of first home buyers with less than 10% deposits
The over 80% LVR space has opened up with more pre-approvals allowed now than six months ago.
Slight drop off in new enquiry. Quite a few preapprovals but clients struggling to find the ‘right’ property
Not too much change, but there is a slight increase in over 80% lending. Still an active space.
Compared with a month ago, are you seeing more or fewer investors looking for mortgage advice?
Unlike first home buyers where the withdrawal following the outbreak of war has almost completely ended, the results of our survey show that investors remain on the sidelines.
A net 30% of mortgage brokers this month have reported seeing fewer investors. This result is unchanged from the previous two months but slightly better than the net 48% negative results of April and May.
Before war broke out but going back to early-December, a net 22% of brokers observed more investors in the market. The fact that this proportion deteriorated to -6% in our early-February survey tells us that investors were backing off before worries soared about fuel costs and world growth.
Comments made by advisors regarding bank lending to investors include the following.
More willing to make the deal work now the market is slower.
A handful of banks opening up to over 70% LVR investor deals.
We have had some really good success in the space of supporting investors who are looking to buy their first rentals. The banks are willing to support split lending structures between banks & not pushing to have everything which is great for the clients.
Digging into the security, especially if it may not be Healthy Homes compliant, and the costs to bring up to rental standard.
Tending to be more lenient on debt to income ratio totals if equity good and solid cashflow.
Compared with a month ago, are you finding lenders more or less willing to advance funds?
A net 26% of mortgage brokers have reported that banks are more willing to advance funds. This is roughly where things have stood since June but a sharp improvement from the low net 2% positive results of April and May.
Since the start of 2023 brokers have been reporting good willingness of banks to lend to home buyers and the situation now appears about normal for the post-boom and slump period.
What time period are most people looking at fixing their interest rate?
Almost 80% of brokers report that borrowers prefer to fix their mortgage rate for the two year period.
The one year term fell out of favour in December and few borrowers are looking to fix there.
The two year term has been highly preferred by borrowers since December last year and no movement away from favouring this time period is apprent yet.
There was a lift last month in the proportion of agents saying that borrowers were preferring the three year term. But this month this preference has fallen away again.
Are more property owners asking about refinancing?
Enquiries about refinancing soared in December as banks strongly competed for business from each other with enhanced cashback offers. But since then and with interest rates rising few people have been making enquiries about breaking their mortgage while banks have eased back in their up front competitive efforts.
