Banks work around loan limits
Home buyers are borrowing 90 per cent loans in some cases as banks work around deposit restrictions, says a Nelson mortgage broker.
Tomorrow the Reserve Bank is expected to again lift the Official Cash Rate which in turn increases mortgage interest rates.
The Reserve Bank has increased the OCR twice so far this year, by 25 basis points each time, to 3 per cent, and is expected to lift it another 25 basis points.
It increased the OCR on March 13 and again on April 24. On both occasions banks followed with increases to their floating mortgage rates, with some shorter fixed-term rates also increased.
However, in Nelson, home loan specialist Mark Papps said the market was not so much being driven by the .25 per cent movements as the banks being able to do "a balancing act" within lending restrictions imposed on them by the Reserve Bank last October
"At this point in time, the banks are only looking for good-quality lending under 80 per cent, but the banks now have a better understand of what percentage of their book is at under 80 per cent, with this in mind there is still room up to 90 per cent lending," he said.
"We can still do 100 per cent loans if there is a guarantor. Current volumes are around the 90 per cent lending with the other 10 per cent through genuine saved deposit, Kiwisaver, family help or a guarantor."
There was also Government grant money for first home buyers.
Generally a $300,000 mortgage at 6 per cent worked out to $830 a fortnight repayments, Papps said. He compared that to some rents in Nelson which were now around $400 a week. He believed interest rates were "still pretty good" as they were still under 7 per cent.
While there had been a drop-off in the housing market, particularly with first home buyers, as more people became of aware of what they could do with borrowing, it was picking up.
Nelson real estate agent Susa Guhl said since the start of the year, sales volumes had dropped 20 per cent.
The 20 per cent deposit criteria had an effect. "Although some lenders are happy to give 90 per cent, first-home buyers are having to really think about what they can do," she said.
Interest rates had not made a huge difference.
The Nelson Mail