Low buyer interest persists

Stricter policies to blame, survey reveals

Low buyer interest persists

First home buyers and investors are unlikely to re-engage with property purchases this year given tighter market conditions and monetary policies, according to the latest mortgage advisers survey from mortgages.co.nz and Tony Alexander.

“The survey shows continued withdrawal of interest by investors and first home buyers, a slight lift in favour of fixing for one year and a decline in perceptions of bank willingness to lend amidst rising test interest rates and increasing requirements for surplus monthly income,” Alexander (pictured) said.

Read next: NZ property buyers – why the numbers are dwindling

The respondents noted that fewer first home buyers are seeking out mortgage advice. Even the June survey among advisers reflected the grim market outlook, with a lower-than-usual number of responses at 42.

So, what could be keeping property buyers from engaging in the market?

Mortgage advisers commented that banks have increased the uncommitted monthly income requirements, with one major lender requiring at least $2,000 a month that isn’t committed to any regular outgoing before they agree to finance.

Although changes to the CCCFA rules have eased, advisers said test rate increases have reduced borrowing capacity more than the rule changes have saved. It’s also become very difficult for most first home buyers to acquire a mortgage with less than a 20% deposit – and near impossible to purchase an existing property without the deposit.

From April to May, advisers noted many banks showed great willingness to advance funds but seemed to have retracted this promise this month as they have become less willing to lend. This could have been driven by higher test interest rates, additional scaling back of rental income and higher requirements for uncommitted monthly income.

Read more: Property investors hurting as home values decline

Even investors are pulling away from the market as the minimum deposit for investors jumped to 40% in May. Given that the trend in investor activity had been static for a year now, Alexander said it was unlikely that future changes in the lending environment would create much of a difference.

“Those stepping forward looking for finance are finding that they often cannot get it or obtain the volume of funding they are after,” Alexander said. “Banks have increased their test interest rates to around 7.6% as mortgage rates have gone up and the Reserve Bank has signalled extra monetary policy tightening is to come.

“Banks want to lend but like everyone else they are increasingly cautious about the New Zealand and world economic environment.”