Getting on the property ladder has become even harder, with banks nudging up the fees charged to borrowers with small deposits.
ANZ, the biggest lender, has lifted its one-off fee for borrowers with less than 10 per cent equity from 1.25 per cent of the loan to 2 per cent.
That means if a borrower wanted to buy a house for $440,000 with a deposit of just under $40,000, they would need to pay $8000 in low-equity premiums.
BNZ followed suit yesterday, reintroducing margins of 0.35 per cent for borrowers with less than 20 per cent equity, and doubling the 0.5 per cent fee for those with a deposit between 5 and 10 per cent.
The changes come ahead of Reserve Bank rules that restrict the number of low-equity loans a bank can issue. They take effect on October 1.
Kiwibank is reviewing its low-equity fees, ASB said its fees were reviewed continually and Westpac would not speculate on future changes.
Mortgage broker Sonya Reid said banks and first-home buyers were already acting on the changes.
"I've already had people this week and last week saying to me, ‘look, we're just going to have to wait now until we save up the 20 per cent'. There is still going to be approvals done, but they'll be a bit less, and I'm sure we'll see a return to parental guarantees."
Banks would be able to cherry-pick clients, because the number of people who wanted to borrow with a small deposit would be greater than the number of loans a bank could issue, she said.
"They'll make [that decision] on the overall quality of the client, so clients on high incomes in professional occupations are going to be probably preferred. How long they've been in jobs, all of those things are going to matter a lot more."
Banks had always examined a client's credit history and bank account history and looked at the stability of their industry, but would now be a lot more rigorous.
The new regime would disadvantage those who could not get help with the deposit from parents or those who did not have KiwiSaver funds she said.
Massey University lecturer in banking David Tripe said some banks had waived the premiums in the past as a competitive move.
"The environment around those has now changed with the Reserve Bank's new rules coming into effect and, as a result of that, banks would expect to no longer be as kind to people."
The changes have been driven by a desire to stop people borrowing when it is risky to do so, but Dr Tripe said the property markets in New Zealand had not been as aggressive as in other countries, and the Reserve Bank might have been a bit "overexcited".
"I think the Reserve Bank has got an unrealistic perception of the problem. If we look around and try and measure the growth rates and housing lending, and the historic rates, it's not clear that the current rate of house lending is excessive. In so far as it is excessive, it's only excessive in Auckland.
"That means that for the rest of the county it's not necessarily an appropriate solution."
First rung of property ladder tough climb
Sam Wild, 26, and wife Annie, 32, have been house hunting for about a year - six unsuccessful offers, dozens of open homes, and an ever-diminishing list of must-haves, but they persist.
Mr Wild said they were open to pretty much anything, anywhere, but it was a simple case of demand outstripping supply.
"I would like a house that is not falling off its piles, that at least gets some sunshine so it doesn't get black mould growing in the place, and you'd like it to be on its own title."
With a deposit of about $25,000 and access to about $25,000 from KiwiSaver, the couple have just over 10 per cent of the pre-approved amount for their mortgage of $455,000.
Their pre-approval will expire in November, and the couple may be affected by tighter rules on low-equity loans.
"You've got to have pretty good history to be able to get a new loan from them . . . whoever is on their best behaviour is going to get them, so there's an element of worry there."
Mr Wild said if they were turned down or affected by low equity loan fees they would just continue to save, because it made sense to have decent equity when making an investment.
"We don't want to pay too much but we do want to get on the ladder."
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