Tighter loans may put lid on homes
The Reserve Bank's new lending rules could drive up Marlborough's rental prices, and hold back the region's house values and construction industry, according to a Blenheim mortgage broker.
The Reserve Bank last week announced its long-awaited new rules on house loans, in an attempt to cool the overheated residential property markets in Auckland and Christchurch. From October 1, banks will be forced to limit mortgages with loan-to-value ratios (LVRs) of more than 80 per cent to no more than 10 per cent of their new lending.
Paul Fuller from Prosper, in Blenheim, said the new rules would have the biggest impact on first home buyers, who played a crucial role in the property market.
The new rules would leave people renting for longer which could push up rent prices, Mr Fuller said.
Fewer house sales could also drive a downturn in the region's house prices and construction industry.
"The new rules are not going to help people build new houses because people who are in a position to build will have to sell their existing homes, but they may struggle to do so because there will be fewer buyers in the market.
"This may stall the market in Marlborough, and result in a decrease in house prices, which is exactly what the new rules are aiming to do," he said.
He cautioned first home buyers against trying to beat the deadline by rushing into a deal that was not right for them.
"If they borrow right up to the maximum, and house prices were to fall back - which is the aim of these new rules - it could take them a long time to resell as they try to regain equity in the property."
Circumstances such as reduced incomes, higher interest rates and falling property prices were all risks that needed to be considered before people signed a sales and purchase agreement.
For example, someone who had borrowed $270,000 over 30 years with a 6 per cent interest rate would be repaying $373 a week. If interest rates increased to 6.5 per cent, they would pay an extra $20 a week.
"If someone lost their job and wanted to move to get a new job, they may not be able to if they are unable to sell their house," he said.
- © Fairfax NZ News