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.