Adviser says newcomers make up 70% of her client base
Despite rising interest rates and a gloomy financial outlook ahead, there are plenty of first-home buyers looking to enter the property market.
NZ Adviser spoke to a mortgage adviser who said that over 70% of clients at her brokerage are first-home buyers.
Insurance & Lending Group financial adviser Rachael Thompson (pictured above) said the first-home buyer clients she is currently working with are located in different parts of the country and not just in Auckland where she is based.
“We are working with many clients who either want to buy a new build or an existing home,” Thompson said. “If it is an existing home they are trying to buy, the properties they are focused on are ones that have been ‘done up’ as these buyers don’t usually have a lot of extra money over and above their deposit.”
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Thompson said some first-home buyers who had more than a 20% deposit were trying to buy properties they could add value to in the future but might have to wait six to 12 months until they could do this when the property has increased in value, or they have additional funds.
“A number of first-home buyers are also utilising assistance from the ‘bank of mum and dad’ to top up their deposit to 20% or give them additional funds to help with buying a property in the price bracket or area they want to purchase in,” she said. “This will help reduce the mortgage they need to service.”
Thompson said rising interest rates were not directly affecting her first home buyer clients.
“Most are wanting to see if the numbers will work for them now based on their financial situation,” she said. “They know what their deposit, income and expenses are before looking for advice on how to structure their mortgage to have flexibility of early repayment, certainty of cost and spread of risk across various terms.”
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Thompson said she and her team had several first-home buyer clients that were withdrawing funds from their Kiwisaver to form part of their home deposit and they could only do this if they met the first-home buyer withdrawal criteria.
“We also have clients utilising Kiwisaver as part of their deposit as a second-chance use of Kiwisaver where they might have previously owned homes and separated from the partner they owned with, then sold that home and now buying again with a new partner or on their own,” she said. “Most of our clients do not qualify for the First Home Grant as their incomes are outside the cap or the property they are buying has been outside the cap.”
Thompson said first-home buyers should obtain advice from a mortgage adviser who is not tied to one lender. She also recommended increasing their deposit to 20% of the total house price if possible.
“It potentially gives you choice of lenders and can help you save time and money,” she said. “I know I add a lot of value to my clients’ first home journey as I have experience as a homeowner, investor, utilising help from the ‘bank of mum and dad’ and I was previously a real estate salesperson.”
Thompson said she advised her clients who were getting help from the ‘bank of mum and dad’ to get advice and understand their obligations under this agreement.
“If it is a loan and needs to be repaid or if it is early inheritance or gift, mums and dads becoming the ‘bank of mum and dad’ for their children, I recommend obtaining legal advice so everybody knows their rights and obligations should they require repayment of these funds in the future,” she said. “I have only seen property prices increase in value throughout the 20 years since I first became a homeowner, and if I told my clients what I bought my first home for in Glenfield, Auckland, 20 years ago, my first-home buyers would be despondent based on where prices are at now. If you can get pre-approved now based on your financial situation and buy your own place to call home in that price range, now is the right time to be buying.”
