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Wait… What? Mortgage Rates Are Dropping Again?

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Wait… What? Mortgage Rates Are Dropping Again?

It might feel like all you hear is bad news when it comes to property and finances lately.

It’s still not a pretty picture in the housing market, but it’s not all doom and gloom either. This month we are bringing you some bright spots.

Mortgage rates have dropped slightly, yes, you did hear that right! And, there might be more changes on the horizon for the CCCFA that could relieve lending issues.

So, let’s look at all the aspects that have been affecting the market since our last update.

 

More Changes To The CCCFA?

In case you haven’t heard enough about the Credit Contracts and Consumer Finance Act yet, more changes to the beleaguered legislation are likely to happen!

A second stage of proposed changes is being considered by the Minister of Commerce and Consumer Affairs, David Clark, with an announcement expected in the next few weeks before submissions open to the lending industry. [source]

The first lot of reforms, which included the removal of some criticised elements from a borrower’s list of expenses, were implemented in July. But, these changes have since been criticised for not going far enough.

We’ll just have to wait and see if the second round of changes makes it easier for people to get home loans again.

 

New Home Loans Are Proving More Difficult For Low Deposit Customers

Two major banks, ASB and ANZ, have announced that they are temporarily stopping offering home loans to people with less than a 20% deposit or a loan to value ratio (LVR) of 80%. [source]

Why have they made this decision? Well, it is likely because The Reserve Bank of New Zealand says banks must have no more than 10% of owner-occupied mortgage lending at an LVR of 80% or more.

An ASB spokesperson said the bank currently had “a full pipeline of customers who are pre-approved for a home loan with an LVR above 80%” Therefore, the bank had paused any new applications to meet the Reserve Bank’s criteria.

But, it doesn’t mean all hope is lost if you are struggling to get together a deposit of more than 20%. Several of the major banks have said they are still offering high LVR loans, and there are lots of other lenders that are worth exploring. There may also be options to help you reach your deposit goal, such as using part of your KiwiSaver.

Working with a mortgage adviser can help you get a good handle on your available finances and give you access to a wider range of lenders than just talking to the main banks, so get in touch to discuss your options.

 

Banks Reducing Home Loan Rates And Increasing Savings Rates

The last few months have seen us announce nothing but increases in mortgage rates. But, this month is a little different! A number of banks have actually reduced their fixed rates for one and two year terms. Major banks including ANZ, Westpac, BNZ and ASB all reduced their rates after changes in international market trends. [source]

If you are due to renew your fixed term mortgage it might be worth shopping around to see if you can get a better deal. If you aren’t due to renew but think another lender might offer a better option, then you can investigate whether the break fee for your current lender is worth it. We can help you explore your options and do the maths to work out the best deal for you.

It’s worth noting that some banks have also raised term deposit rates. Kiwibank was offering 4% for a one year term deposit, a rate not seen for some years. [source] In the current financial climate you might not want to invest money for longer than a year or two so it’s worth keeping an eye on these rates if you are looking for an investment.

 

House Values Are Still Dropping

The fact that house prices are dropping has become such a regular trend that it is hardly news anymore, but the latest figures from the QV House Price Index show things are still dropping. The average value of a New Zealand home has dropped 3.4% over the three months to June and down 4.9% since the beginning of the year. Only Queenstown has shown an increase in value. [source]

While lower prices should make it easier for buyers, there are a range of other issues to consider. These include getting a deposit, the CCCFA and higher mortgage rates, so it can still make things difficult for buyers. The best thing to do is speak to an experienced mortgage broker so they can assess your individual circumstances and provide tailored advice.

 

Is The Rental Market Losing Its Buoyancy?

Rental properties have proven to be a good investment in the past few years with demand high and owners able to charge above-market rents. But the latest figures from Trade Me’s rental price index show demand is falling and more properties are becoming available.

Figures show that year on year for May, the number of properties listed was up 12% but the demand fell by 8%. Rents have also dropped for the first time in 2022. Trade Me Sales Director Gavin Lloyd predicted that landlords might need to start cutting rents dramatically if the situation continues. [source]

If you own investment properties, especially if you have a mortgage on them, then it’s probably worth looking at your position now. That way, you can be prepared should you need to find new tenants or change your rent.

Again, this is something that our experienced mortgage brokers can help you explore. Get in touch with our team today to discuss your investment options.

CCCFA Changes Are Finally Revealed – What Do They Mean?

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Changes To The CCFA Revealed

It’s no secret that the Credit Contracts and Consumer Finance Act (CCFA) was not loved by many. It has been widely criticised for bringing in too much paperwork and causing issues for capable borrowers. Less than two months after the rules came in, a review was ordered and after submissions changes have now been announced.

These changes include:

  • Clarifying that when borrowers provide a detailed breakdown of future living expenses there is no need to inquire into current living expenses from recent bank transactions.
  • Removal of regular ‘savings’ and ‘investments’ as examples of outgoings that lenders need to inquire into
  • Clarifying that the requirement to obtain information in ‘sufficient detail’ only relates to information provided by borrowers directly rather than relating to information from bank transaction records.
  • Providing alternative guidance and examples for when it is ‘obvious’ that a loan is affordable

These changes will come into effect in July and further changes may also come. [source]

Are The CCCFA Changes Enough?

One of the main criticisms of the Act was that it focused too much on spending habits – the infamous cups of coffee that deprived some people of their home loans – and this will continue with detailed breakdowns of spending still being required. The New Zealand Banker’s Association chief executive Roger Beaumont said the changes weren’t likely to have much impact.

“Most of the existing requirements remain in place, meaning customers will still have to provide detailed information about their spending, resulting in a more painstaking process and more loan applications being declined than before the December rule change. While we agree with the government’s aim to protect vulnerable consumers from unscrupulous lenders, the one-size fits all approach for all lenders and all loan types means banks don’t have the same discretion or flexibility they used to.” [source]

While these changes might help, there is still extra work to be done for those looking to borrow money, so it pays to talk to an expert before applying for your home loan. We can discuss your situation with you and help you find the most appropriate options as well as help you get your numbers in order for your application.

Mortgage Rates Up Again (but there might be incentives coming)

Several of the major lenders have raised their fixed rates again, including ANZ, Kiwibank, ASB and Westpac and it’s now unlikely that you’ll find a fixed rate below 4%. [source]

But, with the number of mortgage applications dropping, it looks like the banks might also start trying to entice customers with special deals. Recently Kiwibank has offered customers one per cent of their home loan as a cash contribution up to $10,000, a significant increase on previous deals. It will be interesting to see if other lenders follow suit as the war for business heats up. [source]

While these incentives are tempting, especially if rates are higher, you should still ensure that the other details of the loan product are right for you and that you can meet any of the conditions attached to the deal. The best thing to do is to seek advice from a trusted mortgage adviser before making any firm decisions.

Property Tax Law Changes For Investors

If you own a residential rental property, then you need to be aware of recent changes to property tax laws. The first is around the Bright-Line property rule which taxes the financial gains when buying and selling a home for income.

New builds now attract a shorter 5-year bright-line period and there have also been modifications to the main home exclusion policy when there is another home on the same land for investment purposes. If the main home is over 50% of the land area then the existing exclusions continue to apply. However, if the home is under 50% of the land area, any gains made are apportioned between the rental and the main home.

And, if the main home is not used for periods of more than 12 consecutive months then the time apportioned rule applies in all circumstances. The good news is that bright-line filings can now be processed through myIR, making it easier. [source]

It’s also important to recognise that the ability to claim interest as an expense on loans for residential properties is being phased out for any properties purchased on or after 27 March 2021. You won’t be able to claim interest as an expense for properties purchased after that date. And, the ability to deduct interest as an expense for properties purchased before that date is being phased out, ending 31 March 2025. [source].

Please note that for accounting and taxation advice, you will need to speak with an Accountant or any tax expert.

Lending Continues To Drop

The latest figures from Centrix show that demand for mortgages is down again – by 27% in the year to the end of May. And those who did borrow borrowed less money than the previous year, with the value of loans falling by 38% year on year. [source]

What does this mean for everyday borrowers? Well, not a lot in all seriousness. We know that the property market has shifted slightly, with the frenzied buying period over. So this helps to explain why lending is down. In saying that, it could still be the perfect time to make your next property move and we are happy to help you make the decision with some tailored financial advice.

House Prices Are Still Dropping

The latest QV report shows that house prices are now down to similar levels seen in November last year. Independent economist Tony Alexander says his latest survey of real estate agents with REINZ shows that the market is now being impacted by a fear of overpaying on the part of buyers, especially investors. Agents are reporting fewer people attending open homes and auctions, as well as falling prices in their locations. [source]

It was also noted that ex-pat Kiwis planning to return from overseas were not boosting the market as expected.

So, what does it all mean? Well, if you are buying and selling in the same market, then the current price fall will not impact you hugely. Properties are still selling for good prices. Just this week a property in Greenlane sold for nearly $500k above its reserve.

If you have been thinking about your next move in the property market, then it’s time to get informed about what you might be able to do. Here at Mortgage Suite we provide honest and trusted advice that you can count on.

Get in touch with us today for an obligation-free chat about your next move.

Breaking My Fixed Term

It feels like an absolute age since we’ve been able to travel internationally. But, now that the borders are open, I’m taking the opportunity to break my fixed term here in New Zealand.

I’m ducking overseas to visit my lovely daughter in the USA. Unfortunately, due to lockdowns, we ended up missing her wedding.

But, don’t worry! We aren’t really gone. We’ll still be available via email and will still be able to work with you and our various lenders to ensure you can still take that next property step you’ve been dreaming of. We’ll be back on the ground in New Zealand on 28.07.22.

Interest Rates Are Rising, But What Else Is Happening?

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Interest Rates Are Rising, But What Else Is Happening?

With the Reserve Bank raising the OCR to 1.5% in April, it is no surprise that interest rates are on the rise again.

Oh, and the eagerly awaited changes to the CCCFA are expected to be announced soon (watch this space).

But, what else has changed since our last update?

What’s happening with property prices, mortgages and the cost of living?

Let’s look into all of those things now.

 

Property Prices Are Trending Down

For a few months now, these updates have included news about property prices falling and this month is no different.

Recent data shows that both Wellington and the Bay of Plenty now have average asking prices below $1million and property prices are dropping in many other main centres – including Auckland.

This further tip in the market is good for buyers, with realestate.co.nz spokeswoman Vanessa Williams saying buyers were now less rushed into making decisions.

“We have become accustomed to urgency in the market with multi-offers and high competition being the norm. Right now buyers have more time to do their due diligence and make an educated decision on their future property,” she says [source].

The great news for buyers is that it means you have more time to do research around your home purchase. That can include getting the right mortgage deal in place without feeling rushed. AT Mortgage Suite, we welcome the opportunity to chat with you and get the mortgage process right.

But, it doesn’t have to be bad news for sellers. There are definitely still buyers out there willing to pay a fiar price for a great home. And if you are selling and buying in the same market, then any reduction in selling prices is negated.

 

House Consents Are Up

While the number of house sales might be declining, the number of people looking to build appears to be increasing. Figures from Statistics NZ show the number of building consents for March was more than 5000, and a record 50,858 consents were issued in the year up to the end of March 2022. Interestingly the number of consents for multi-unit dwellings such as townhouses, apartments and retirement village properties also increased and overtook house consents.

This might reflect changes in the development sector and a focus on higher density housing in many of our main centres. Depending on where you live, it may now be possible to subdivide your land and add a multi-unit development like townhouses.

It also presents an opportunity for people looking for investment opportunities to get involved with developments on existing land. If you are considering property development, especially for multi-unit development, then you need a specialist loan. At Mortgage Suite we can give you a range of options from both bank and non-bank lenders.

 

Rents Increasing Along With Other Costs

Inflation has hit a new high, prices are rising and the cost of living is going up, and it seems that rents are not immune from increases.

The latest data from Trade Me’s Rental Price Index shows rents have increased across the country, rising 7% year on year to the end of March. There were also fewer properties on the market, and demand for tenancies was also dropping. [source]

If you own a rental property you might be tempted to put your rent up, especially if you are facing increased costs of your own. But before you do, think carefully about whether it is the right move. If your current tenants can’t afford the rent and have to move out, you may find it harder to replace them in the current environment.

If you have a mortgage for your rental property, have a chat with us and see if we can help you restructure or refix it to reduce your costs first.

 

Changes In The Investment Property Sector?

The New Zealand Property Investors Federation is putting forward ambitious plans to fix what they say is a broken rental sector.

The Federation says that while many believe rental properties are held by big landlords who have many properties in a portfolio, the majority are actually held by people who own just one rental property – often mum and pop investors. However, they believe investors have been scared off by issues such as the brightline test changes, increased mortgage costs and tighter lending regulations. Their proposals for investors include returning the brightline test to two years and making mortgage interest costs a legitimate tax deductible expense again.

While these changes would no doubt be welcomed, especially by small scale investors, it’s important to remember that they are just proposals by a national body. There is no guarantee that any of their ideas will come to fruition. 

Having said that, with falling property prices and a lack of foreign investors, investing in property may be becoming a more attractive option again. If you’d like to discuss your financial situation and the possibility of getting a mortgage for a rental property, get in touch.

 

Mortgage Advisers Are Arranging More Loans

Both ANZ and Westpac reported this month that mortgage advisers have originated large proportions of their home loan lending over the past six months. 

Both banks said more than half of the loans arranged over the period were arranged with the help of an adviser. The change was partly attributed to the closure of some branches and less availability of in-house staff due to Covid-19 and lockdowns. But ANZ chief executive Antonia Watson said it was also in part due to more complicated lending environment, meaning people were often seeking more advice before committing to a loan.

This is good news, as mortgage advisers are now becoming a more integral part of the home loan landscape and that banks are likely to see using an adviser as a normal part of the process. 

Remember that by using an adviser you usually have access to more options for your home loan, including non-bank lenders, which gives you greater flexibility to choose the right solution for your needs under expert guidance. Advisers can also help to make sure your home loan remains right for you with yearly reviews and advice on the benefits or otherwise of switching to a new loan type or even a new lender.

If you’d like some assistance with sorting your home loan, give us a call to talk through your options.

 

 

Is Market Volatility Creating A Buyer’s Market?

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Is Market Volatility Creating A Buyer’s Market?

Interest Rate Update

It wouldn’t be a monthly roundup without some information about what interest rates are currently doing! So, here is the lowdown:

Longer term interest rates are continuing to rise. Back in March 2021, the average 5-year rate was 3.78%, in February this year, it was 5.47%. Now, the main banks have 5-year rates between 5.69% and 6.09%.

With rates keeping up, it is definitely time to consider what this means for your repayments. “For borrowers with a $500,000 home loan, the difference between those two rates is just over $220 a fortnight, on a 25-year loan term.” [source]

The best thing to do is to seek advice from an experience mortgage broker, like the team here at Mortgage Suite. We can help you look at your current financial situation and how any rate changes could affect your repayments.

 

CCCFA Drafted Changes Revealed

According to credit reporting agency Centrix, mortgage applications are down 19% year-on-year.  Inflation, rate hikes, new lending restrictions and uncertainty over Omicron were all highlighted as reasons. [source]

Particular mention was made of the Credit Contracts and Consumer Finance Act (CCCFA) which, as we’ve previously highlighted, has caused some issues with lending applications. Currently under review, the proposed changes have been drafted:

  • Excluding savings an investments from “listed outgoings”
  • Living expenses benchmarked against statistical data rather than the need to trawl through bank statements
  • More trust that borrowers will modify their spending if needed to meet mortgage obligations
  • Other changes refer to issues like a borrowers’ ‘reasonable surplus’, and any ‘obvious’ affordability of a loan

If you are feeling uncertain about your ability to get your mortgage application approved then getting advice from an independent broker can help. We can recommend a range of options for you and access a number of different lenders.

 

Are Major Centres Becoming Buyer’s Markets?

We’ve definitely seen house prices skyrocket in the last year. But, after a period of very high prices and difficulty for some home buyers, the latest figures are starting to paint a different picture. They show the market is continuing a downward trend.

Data from realestate.co.nz shows properties in Wellington are taking longer to sell, and sales have also slowed in Auckland. Stock levels are up in most regions which suggests more properties on the market for buyers to choose from. But the number of new listings added dropped, perhaps as a result of uncertainty over Covid and inflation.

“When inventory is higher than the 15-year long-term average, it shows there is more stock than people buying property,” says realestate spokeswoman Vanessa Williams.

“Theoretically, if no new listings came on to the Wellington region market and all existing stock was sold, there would be no houses available to buy in 17 weeks which is longer than the long-term average 15 weeks.” [source]

The last Wellington was a buyer’s market according to realestate.co.nz was back in June 2014.

 

Is The Property Market Trending Down?

The latest QV House Price Index also shows the property market is heading down, with the national average value declining for the second month in a row. Ten of the 16 cities and districts measured had a decline, up from just four in January.

While these reports might be encouraging for buyers, property prices are still high. The real estate report notes that average sale prices are still above $1million and demand is still high.

So, what does it all mean? With the borders reopening to certain countries soon and eventually the rest of the world, we aren’t sure what the impact will be.  We may see an effect on property prices if Kiwis overseas decide to move back home.

What we do know is that now might be a good time to start looking for a new home, especially if you are trying to get on the property ladder. If you’d like advice from an experienced mortgage broker to get your options sorted, get in touch.

 

Are You Leaving Yourself Short For Retirement?

Using part of your KiwiSaver funds has become a common way to afford a new home, particularly for younger people.

But new research carried out on behalf of Te Ara Ahunga Ora, the Retirement Commission, reveals that some younger New Zealanders could be leaving themselves short when it comes to retirement funds. The research used modelling to compare what a person might have in the KiwiSaver after 14 years compared to actual average balances. The difference was many thousands of dollars. [source]

Part of the deficit was attributed to people withdrawing savings early to put towards a first home. Figures from Inland Revenue show that withdrawals for a first home have been increasing year on year.

The lesson to be learned here is that finances need careful planning. While the ability to withdraw from KiwiSaver to buy a home is a great option and has helped many people, it’s important to have a plan for how you will grow your retirement fund again to compensate.

It’s also vital to make sure you are getting the best value out of your mortgage both when you first buy and in the future if your circumstances change. If you’d like to chat about your mortgage – whether you are looking to buy your first home or want to make sure you still have the best product for your current circumstances, give us a call, and we’ll be happy to chat.

Three Good Reasons to Invest in Commercial Properties

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The New Zealand real estate market is going uphill in a low-interest-rate environment for both residential and commercial properties. In a time when house prices are skyrocketing, more and more investors are looking at commercial properties as an investment opportunity for long-term and big returns. They offer several advantages over residential properties in terms of better upkeep and higher incomes in your portfolio.

Commercial property investment is very different from investing in residential properties. One needs to look at zoning laws, risk profiles, tax regulations, and return possibilities before investing in a commercial place. However, there are plenty of lenders ready to help and support investors with commercial property loans in New Zealand. It creates a strong investor interest and trust to drive the market upside.

Although there are several reasons to think twice before making an investment call, here’re some good reasons why investing in a commercial property can be a good bet for you.

Long-term investment

Commercial properties come with a lease agreement for a longer duration, which makes it a more profitable choice over residential properties. Over time, commercial properties are also bound to appreciate better given the growth and development in the neighborhood and local market. Commercial properties are a good choice to make a strong investment portfolio to accumulate wealth over the years.

Better income levels than average

Commercial properties perform better than residential rental properties in terms of returns. They have a higher income potential than any other real estate investment. According to a commercial housing market report, commercial properties provide an average ROI between 5 to 5.5 percent, whereas a residential rental property returns around 3 percent on the investment. Although these returns may vary on various factors, commercial properties provide a better average income to investors than any other rental property. 

A plethora of options for ownership structure

Investors can choose from a plethora of options depending on the budget and ownership structure they want to possess. The New Zealand commercial property investment market allows investors to team up with other investors to get into the playfield with lower risk. There are mainly five types of commercial property ownership entities in New Zealand to give investors more flexibility:

  • Individuals
  • Companies
  • Trusts
  • Partnerships
  • Syndicates

All commercial property ventures have different risk profiles, financial obligations, accountability, and tax regulations for long-term commitments.

In addition to these advantages, investors can get commercial property loans in New Zealand for a variety of investment opportunities to run a business. However, every commercial property has its financial obligations and investors need to conduct a proper assessment of property valuation, lease terms, exit strategy, and loan eligibility before making an investment decision. Commercial mortgage brokers at Mortgage Suite can help you through your commercial property loan assessment process to invest in the right investment property for long-term returns. Give us a call to discuss your requirements.

Top Tips for Obtaining Small Business Loans

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Today, small company loans are available from several traditional and unconventional lenders. These loans can help your organization expand, improve sales and marketing activities, and allow you to hire new employees, among other things.

To begin, you must research several business loans in New Zealand. Getting a loan approved can be difficult if the lender isn’t confident in your ability to repay it. There are also a few frequent blunders that many business owners make when applying for their loans.

Before you fill out your business loan application, there are a few things you should know.

  1. Determine the Purpose of Your Loan

Lenders want to know how you plan to spend the funds, as this information helps them assess the viability of your business loan application. Make a comprehensive loan proposal.

Your loan proposal should include the following information:

• The amount of money you’ll require
• The way your business will use the money
• How you plan to repay the loan
• What you will do if your business fails to repay the loan

Purchasing new equipment or extra inventory, hiring experienced labor, or expanding your business are some of the best options to use a small business loan.

  1. Apply for business financing early.

Applying for your loan as soon as possible might assist speed up the process and ensure that you are not left waiting for funds.

Your lender will want to view your company accounts, so having current trading information can help you get approved faster.

  1. Your personal credit score is crucial.

When it comes to obtaining a company loan, one of the most common mistakes small business owners make is overlooking their personal credit score.

Lenders will use your personal credit score to analyze your track record of routinely satisfying financial obligations if your business credit score isn’t good.

Even if you aren’t planning on taking out a loan, you should keep an eye on your credit score to maintain it healthy.

  1. Prepare yourself to answer questions.

If you want to acquire a business loan, you must be willing to give extensive information and documentation regarding your company.

Lenders may also want to examine your financial statements and accounting records.
Before filling out the papers, double-check that you have all of your business details. The following are some of the documents you should have ready:

• Financial statements
• Enterprise and personal income tax returns
• Your company’s tax identification number
• Your company’s permit

  1. Find a suitable lender.

All banks and lenders are not created equal. Talk to the lenders before applying for a small business loan.

Since you can access different lenders and loan options with just one application, a lending marketplace is a great place to begin.

The Bottom Line

Obtaining a small business loan in New Zealand might be difficult. However, with the assistance of a business loan advisor, you can make the process of acquiring working capital considerably easier.

Is The Property Market Finally Trending Down?

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Is The Property Market Finally Trending Down?

Mortgage Rates Look Set To Keep Rising

We have seen ANZ raise mortgage rates again this month, and the other big banks are likely to follow suit. Most of the rate changes have been related to fixed mortgage rates. That means you aren’t likely to be affected until you have to re-fix your mortgage.

But, it’s good to be mindful of the changes now so that you know what is coming up.

“The latest changes from ANZ aren’t major – a small step in what could be a long relentless climb over the next few months…For those watching financial markets closely, these ANZ rises aren’t a surprise. They start new pushes higher that will clearly put fast-rising pressure on household budgets that include mortgage repayments. And they will pressure landlords.” [source]

If your fixed rate mortgage is up for renewal soon, it might be worth shopping around to see if another lender can offer you a better rate. If you are fixed for another few years, then you might want to assess your situation. It is possible to break a fixed term mortgage to swap to another one, but there is usually a fee involved. However, that may be cost-effective to get a better deal now, rather than risk even higher rates when you come to re-fix in a few years.

Advice from a mortgage broker, like the team here at Mortgage Suite, will be invaluable when making decisions about fixed term mortgages.

Trouble Getting Mortgages Approved?

Those changes to the lending laws are rearing their ugly heads again! New research shows that changes to the Credit Contracts and Consumer Finance Act have not done much to protect vulnerable people against taking on debt but are affecting people with solid applications.

The report from credit agency, Centrix, says low-risk applications have been affected. Loan conversion rates had dropped for people with credit scores above 700 (a good score), but there had not been much change in approvals for people with credit scores below 500 (low to average score).

The report says that lenders would typically have more discretion over lending, but the new Act has taken some of that discretion away.

“Where there used to be a lot of discretion, brokers would say, that if you take out this mortgage we know you would cut back on some of that discretionary spending, and therefore we are OK with this. They would say, you have had three loans in the past and you have met all your obligations and we have never had a problem with you. So there used to be an element of discretion, whereas under the CCCFA, you look at the income and then the expenditure and if there is not a surplus, you cannot issue the loan.” [source]

If you are thinking about taking out a mortgage, you need to make sure your finances are in good shape and have a good idea of all your income and outgoings. You may need to get rid of some discretionary expenditure like subscriptions to streaming services or eating out before making your mortgage application.

If you’d like to talk more about your situation and your mortgage options, get in touch with the Mortgage Suite team.

Undoing The CCCFA Blunders

We’ve just finished saying that it has been harder for people with good credit scores to get loans approved, but hopefully that could all be a thing of the past now!

Further changes to the CCCFA have been announced on 11 March due to intense criticism of the act. Here’s the lowdown:

“The changes include removing regular ‘savings’ and ‘investments’ as examples of outgoings that lenders need to enquire into when assessing the borrower’s future expenses.

They also clarify that when borrowers provide a detailed breakdown of their future living expenses, and these are benchmarked against robust statistical data, there is no need to also enquire into their current living expenses from recent bank transactions.

They also say that where lenders choose to estimate future expenses from recent bank transaction records, they are permitted to obtain information about how their current expenses are likely to change once the contract is entered into.

And they say that the requirement to obtain information in ‘sufficient detail’ only relates to information provided by borrowers directly, rather than relating to information from bank transaction records.

They provide further guidance on when a lender needs to allow for a ‘reasonable surplus’ and how lenders should set surplus requirement.

And the changes provide alternative guidance and examples for when it is ‘obvious’ that a loan is affordable. In cases like that, a full income and expense assessment will not be required.” [source]

What does it all mean? Well, hopefully these changes will make it more viable for many families to access lending. But, only time will tell if these changes have the impact we are looking for.

Want to know more about your current financial position? Then, reach out to the team here at Mortgage Suite. We can help you understand your borrowing potential, refix mortgage rates, discuss investment options, and answer your general questions. So, don’t hesitate to reach out to us today.

Property Prices Might Finally Be On The Way Down

The latest Quotable Value (QV) House Price Index figures show that house values may have started declining.

According to the Index, the average value of all homes throughout New Zealand was down to $1,053,483 at the end of February from $1,068,765 at the end of January. That’s down $10,282 for the month. There were falls in both Auckland and Wellington as well as other regions like Dunedin and Queenstown-Lakes.

QV General Manager David Nagel says while some of the changes might be down to Covid, it is also a sign of a changing market.

“There are less buyers out there now, with the tightened credit rules and rising interest rates taking a number of first home buyers and investors out of the market altogether. Increased listings from both new builds and existing homes are providing the dwindling buyer pool with ample choice and this is putting downward pressure on prices.

It’s taking a lot longer to sell a house this year, with open home attendance and auction clearance rates significantly impacted. While part of this may be attributed to Covid-19, primarily we’re seeing a residential property market that has peaked and is searching for the new equilibrium.” [source]

What does that mean if you are planning to buy or sell? Well, of course this won’t have much impact if you are buying and selling in the same market. However, if you are buying and selling in different markets, it’s definitely worth seeking advice from a mortgage broker to see what your options are.

But Confidence In The Market Is Down Too

ASB’s latest Housing Confidence Survey paints quite a gloomy picture. The survey, conducted over three months to the end of January, found 28% more people thought it was NOT a good time to buy. This is the lowest level of confidence in the survey’s 26-year history.

So, what does it all mean?

While lower property prices could be good news for people looking to get onto the property ladder, higher interest rates and tight lending criteria could still be barriers. Lower property prices are not such good news for people looking to sell, especially if they were hoping to release equity by downsizing or moving to a cheaper area.

However, for people looking to buy a second property to act as a rental investment, it may open the market up. So, depending on your situation, it is always best to seek advice from a mortgage broker to ensure you are making the right more for your individual situation.

 

Are You Eligible for First Home Buyers Loan in New Zealand?

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Homeownership can be challenging, especially when you are buying your first home. Buying your first home takes careful planning, research, and serious budgeting to meet certain financial and legal criteria. It is often the biggest financial decision one will make in his entire life, and with the right help and mortgage assistance, it is not impossible.

When you are planning to buy your first home, there are several lending options available to fulfill your dream of homeownership. Understanding how the whole process works and what are specific lending criteria for your specific situation is the key to planning successfully for the total cost of home buying. Saving for a house deposit should be your first step in order to get your first home buyer’s loan in NZ. These days, you can be eligible to borrow with a deposit of just 10% in some cases. The lower deposits come with bigger risks for both lenders and borrowers, however, it can help you get a mortgage with a little saving.

Meeting the lending criteria is the key to sorting your finances in the first place. You will need to save for a deposit and sufficient income to be eligible and financially able to make monthly repayments. The CCCF criteria is hindering a lot of the first home buyers in getting over the line. The Lenders now have a responsibility to ensure every expense is taken into consideration when assessing an application. Costs such as gym fees, streaming costs, spending on takeaways and alcohol, regular purchases of Lotto etc are now factored into Debt Servicing. We can guide you prepare for a home loan well in advance so that you don’t get caught with unnecessary expenses.

For Home Loans with low deposit, you will also need to meet the specific lending criteria defined by your lender or bank for first home buyers’ loans in NZ. The lending criteria of your lender may also include your credit history, level of debt, and ability to repay the loan. The criteria are listed below that you need to meet additionally to be eligible for a first home loan in New Zealand:

  • You must live in the home for which you are getting your first home loan.
  • Borrowers also need to pay a Mortgage Insurance (LMI) premium of the loan account.
  • You must be a New Zealand citizen, permanent resident, or a resident visa holder to be eligible for a home loan in New Zealand.
  • The applicant should be a minimum of 18 years of age.

Each region has a house price cap, and the maximum loan amount you can borrow depends on where you are purchasing your first home. At Mortgage Suite, we can help you check your eligibility and apply for a first home buyers loan in NZ as per your specific situation. Contact us for more details.

Is It Harder To Get A Mortgage?

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Is It Harder To Get A Mortgage?

Is it harder to get a mortgage in 2022?

For many, it feels like it is harder than ever before!

There have been numerous reports of people’s applications being declined for buying lotto tickets, coffees, and too many takeaways.

There was one particularly memorable story about a lady unable to get a mortgage top up for urgent house repairs due to a $187 Christmas shopping trip to Kmart.

So, is it really harder to borrow right now? And what’s causing it?

Let’s look into these questions now and explore what else is going on in the world of property and finance right now.

 

Is It Harder To Get A Mortgage?

Would-be borrowers are not being declined for the fun of it. The number of mortgages getting the green light are decreasing due to a new regulation called the CCCFA. In fact, due to the new rules introduced, application approval rates fell by 20% at the end of 2021.

Why is that?

Well, before approving your mortgage, the bank want to ensure that you’ll be able to make the repayments even if interest rates were to rise and your repayments potentially increased. In order to do that, they need to review the funds coming into your account and what goes out. Makes sense, right?

But, the CCCFA has made the process more complicated. Previously, the banks would have asked for a draft budget on your monthly expenses. If interest rates increased, they would have expected you to cut your expenses to maintain your mortgage repayments.

Currently, they want to see your ACTUAL expenses. That means they will see every coffee, every takeaway and every splurge purchase you make. They want to ensure you are already living as if interest rates were at 6-7% even though they are only 3-4% right now.

 

What Does The CCCFA Mean For Mortgage Applications?

While it is not impossible to get a mortgage right now, you need to ensure your application looks attractive to a lender. The first step in doing this is talking to the team here at Mortgage Suite. We will be able to take a look at your current spending in relation to what you earn and advise on whether you need to cut back a lot, a little, or not at all.

If you do need to cut back, we’d advise removing anything termed as luxury spending, like Netflix, Sky Sport, coffees, meals out or other entertainment costs.

Once you have completed 3 months of good spending habits, then we would be able to lodge any borrowing applications with major lenders. Once you have received your funds, you are then able to return to more normal spending habits if your budget allows.

So, take the first step and chat with us about your current financial position now!

 

Will This Be A Long Term Thing?

The CCCFA is legislation that is in force currently. However, it has not had the impact that was intended. Initially, the legislation was brought in to prevent high interest providers from lending to people who couldn’t really afford to borrow.

But the impact has been more far-reaching, impacting everyday families just trying to buy a home or complete renovations. The regulations around the CCCFA have made borrowing expectations quite unrealistic.

Many finance professionals agree that the regulations are not realistic. So, there is currently a parliamentary petition in place (which Mortgage Suite are a part of), to get the government to review and address this law.

The government have approved an enquiry in the CCCFA which will look into the intended and unintended consequences, as well as considering the impact of external factors like the global economic situation [source].

We’ll keep you posted on any updates that arise from this. And in the meantime, if you have any questions about your borrowing potential, get in touch with the Mortgage Suite team today.

 

In Other Financial News:

Property Prices Reach Record Highs

Trade Me Property Price Index shows the national average asking price jumped by a quarter year-on-year, to reach a new high of $956,150 in December – the biggest on record [source]. While selling may seem attractive, it is important to check whether you are in a financial position to take the next step! Make sure you seek sound advice before making any decisions.

Private Landlords Could Face More Changes

Private landlords could be faced with further restrictions on running their properties as a business. Associate Housing Minister Poto Williams has asked her officials to look at rent controls and rental indexing as a way to help renters struggling with the cost of accommodation [source]. The best advice is to ensure that landlords are charging market rate for rent now, as they could be impacted by potential changes in the not too distant future.

Inflation Likely To Continue

Economists are predicting that inflation will continue to rise throughout 2022. The comments follow last week’s announcement that the Consumers Price Index (CPI) increased 5.9% in the year to December. This was aided by a 1.4% rise in the December quarter, and is the highest annual rate since 1990 [source]. Inflation impacts the cost of everything, so it’s vital to get a handle on your current financial position so that you are able to make informed decisions going forward.

 

If you have questions about any of the ideas raised here or just want financial advice you can trust, get in touch with the Mortgage Suite team today.

Property Market 2022: Our Predictions

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Property Market 2022: Our Predictions

2022 is here! Happy New Year.

We hope you had a wonderful summer break with your friends and family.

While we might have been taking it easy with some time off, the finance and property markets never stop! So, there has been plenty happening while we’ve all been at the beach.

The major changes to the Credits Contracts and Consumer Finance Act are heavily impacting the lending scene, so is it harder to get a loan now?

And what will 2022 have in store for us when it comes to all things finance?

Finally, could the winds in the property market be changing and shifting to a buyer’s market?

We answer all those questions in this month’s blog. You can read it here:

 

Is It Too Hard To Get A Loan Now?

Responsible lending is a vital consideration for all finance providers. No one wants to see people end up in financial trouble because they have too much debt to deal with. So, with the best intentions, major changes to the Credits Contracts and Consumer Finance Act (CCCFA) came into force on 1st December 2021 to create more regulations around responsible lending.

Unfortunately, the legislation hasn’t quite had the intended effect. While it has generated positive results for high interest “payday” lending, the wider repercussions are impacting everyday people wanting to borrow for mortgages and other legitimate reasons.

The impact of the legislation changes are starting to snowball. As a result, Financial Advice NZ is seeking an urgent meeting with the Minister of Commerce and Consumer Affairs to discuss the fall out.

“The detailed information on spending habits demanded of would-be borrowers is backfiring, the organisation says. It says borrowers who could previously obtain finance and service those payments for their home are often locked out of obtaining finance in the future.” [source]

The biggest lesson we can take is that it is important to speak to a Mortgage Broker as soon as you feel you might want to borrow. That way, you can receive strong advice on how to make your application look attractive to a lender while meeting the new regulations. So, if you are considering borrowing in the near future, get in touch with us for advice you can trust.

 

What’s Ahead For 2022?

The Westpac economists have released their predictions for what will happen in 2022 finance-wise.

“Westpac is forecasting a significant upswing in demands for high wages in the coming year. It says this will help push the Official Cash Rate to 3% as the Reserve Bank tries to hold inflation in check.

On the housing market, Westpac expects house price growth to slow substantially in the coming months, but start to slip back towards the end of the year.

Inflation has surged to 4.9% by the September quarter, and most economists expect it to go higher. Westpac says there was some debate about how long lasting this would be.

“We now recognise that the monetary stimulus put in place in response to Covid will need to be withdrawn – and beyond to the point where monetary policy is outright tight.”

But the bank qualifies this by saying the 3% cash rate expected by 2023 will probably not be permanent but will represent a temporary peak in the cycle, in order to cool demand back down to a more sustainable level.” [source]

What does all this mean?

If Westpac economists proves to be correct, then Interest rates are going to rise further, so now is the best time for a review of your current and any future lending. The cost of living may rise along with mortgage rates, so you need to make sure you can still service your financial commitments. And, as we mentioned earlier, rules and regulations around finance have changed significantly, so taking advice is vital before making any decisions.

 

Is It Becoming A Buyer’s Market?

It’s no secret that the property market has been in favour of sellers in recent years. But, could that all be changing?

“In its latest Market Pulse report, CoreLogic says already there are signs the number of listings are firmly climbing, although total supply across the country is fairly tight.

More choice for buyers can only mean reduced price pressures in due course, and a switch to a buyer’s market – albeit they’ll have to work harder to get the finance in the first place.

Next year a buyer’s market might emerge for the first time in a few years, but it’s important to note a reduction in vendors’ power may not necessarily equate to outright falls in house prices.” [source]

Right now, the market is in a unique position. With a number of listings to choose from the buyers have a bit more power to play with. Yet, housing prices are still high which will benefit the seller. It is good news on both sides of the equation now.

But, that could all change if the predictions come true and the market swings in favour of the buyers. So, it can be handy to know what kind of a financial position you are in to be able to make informed decisions. If you would like to discuss this, reach out to the Mortgage Suite team today.

 

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