Fixing two years strongly preferred
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 44 responses.
The main themes to come through from the statistical and anecdotal responses include the following.
Some slight easing of lending criteria is underway, focussed more on first home buyers than others.
Buyers are wary of the environment around them and especially of interest rates rising.
Borrowers strongly prefer fixing two years over any other term.
Compared with a month ago, are you seeing more or fewer first home buyers looking for mortgage advice?
Our survey has recorded a substantial pullback in the extent of first buyers stepping back from the housing market. Whereas last month a net 54% of mortgage brokers said that they were seeing fewer first home buyers, this month just a net 16% have reported a decline.
Caution from buyers continues but the initial shock brought on by the US invasion of Iran and increased interest rate expectations has faded to some degree.
Comments on bank lending to first home buyers submitted by advisors include the following.
First home buyers remain very active with those committed to house buying seemingly unconcerned about interest rate movement at this stage. I’ve noticed an increased level of construction enquiry this month.
First Home Buyers keeping us going strong along with those looking to upsize and downsize. Nice to see the market affordable for these people after the high prices from 2021.
Lots of property on the market for my first home buyers – almost too much choice.
The banks are chasing these now.
Banks very welcoming to first home buyers and one bank recently switched to offering 5% deposit and this sits outside Kianga Ora.
More availability for above 80% lending.
Compared with a month ago, are you seeing more or fewer investors looking for mortgage advice?
In contrast to the pulling back from the brink seen with young buyers, for investors the shock of the US invasion and myriad other factors affecting expected investment property returns is producing a strong stepping back from the market.
A net 48% of advisors have this month reported that they are seeing fewer investors coming forward for financing advice. This is statistically unchanged from the net 49% of last month.
Conditions with regard to investors have broadly returned to where they were in 2022.
Comments made by advisors regarding bank lending to investors include the following.
Banks continue to lend to good customers. Some are lending higher than 70% LVR on a case by case basis. Anything ‘outside the box’ needs to be squeaky clean credit wise.
DTI’s catching up
One bank offering 85% LVR for a limited time which has a nice appeal to investors who have been previously leverage locked.
For existing investors seeking interest only extensions the majority of banks are requiring full applications which in many instances ends up driving their clients off to another bank.
Now looking to go over the 70% threshold in some circumstances.
Compared with a month ago, are you finding lenders more or less willing to advance funds?
Our survey this month has produced the same result as a month ago with regard to broker perceptions of the willingness of lenders to advance funds. Things remain in the positive but only at a reading of a net 2%.
In contrast, in March a net 20% of advisors felt that lenders were loosening their lending criteria and in November last year this reading was 49%.
Funds are being made available by the banks, but some new caution may understandably have crept in as we all regard events offshore in particular with some trepidation.
What time period are most people looking at fixing their interest rate?
There is very strong preference from borrowers for fixing their mortgage interest rate for a two year period. 85% of brokers say that this is the preferred option with 5% saying three years is preferred and the remaining 10% saying there is no preference.
Borrower interest in fixing for just one year is minimal to zero.
The two year term has been strongly preferred since our first survey for the year early in February.
Only when mortgage rates were unusually low during the Covid period did Kiwi borrowers show any strong preference for the “long” time period of three years.
Are more property owners asking about refinancing?
The strong easing off from property owners in enquiring about refinancing has ebbed for now. This earlier run of firm net negative responses to this question may reflect the ending of the cashback war between lenders. This month one or two brokers have noted some cashback offers as starting to appear again.
