The Mortgage Myth
A third of people think that it is harder for first home buyers to obtain a mortgage now than it was ten years ago – despite some fundamental changes in lending criteria amongst this country’s lending institutions.
According to a recent survey conducted on behalf of Mike Pero Mortgages, 34% of those polled think that it is harder for first home buyers to get a mortgage now than it was ten years ago. The survey also showed that 49% of people think that it is as easy for first home buyers to get a mortgage, while 17% did not know either way.
Managing Director, Mike Pero, was surprised at the number of people who think that it is now harder to obtain a mortgage.
“There have been some fundamental changes in the way banks and other financial institutions approach lending,” says Mr Pero. “In general, lending criteria has softened to make it easier for first home buyers to obtain mortgage finance.
“For example in the past lenders would only lend up to 75% of a property’s value, now it is common for most lenders to lend up to 90% or 95%,” says Mr Pero. “As another example, most lenders required valuations for deals over 50% of lending, that rate has now been pushed out to 80%.”
Mr Pero also points out that while things such as speed of approval, better IT systems and approval authority below manager level have also improved efficiency within the industry, the industry itself has become much more competitive.
“There has also been a dramatic increase in the number of players in the mortgage market,” adds Mr Pero. “Large institutions, such as insurance companies, are now
combining very competitive mortgage products with aggressive marketing strategies. Also, a lot of smaller financial organisations now offer mortgage products and many membership organisations also offer financial services, including mortgages, to their members.”
Mr Pero believes that this environment has lead to an unprecedented amount of choice for the consumer. This choice has, in turn, fuelled the growth of the mortgage broking industry in New Zealand.
It is currently estimated that 25%1 of all mortgage business written in New Zealand is placed through Mortgage brokers. In Australia 40%1 of all the mortgage business written is through brokers, in the United States the figure is a staggering 65%2. Although Mr Pero expects the figure here to rise, he believes that there is still some misunderstanding in the marketplace about the role of a mortgage broker in obtaining finance.
The Mike Pero Mortgages survey also asked people who they would go to first for mortgage finance, 64% said that they would go to a bank, 20% said a mortgage broker, 4% said another financial institution and 12% said that they did not know.
“The survey results roughly reflect the market share as it currently stands,” says Mr Pero. “The industry here is still very young and many people do not realise that the services of a mortgage broker are completely free of charge and independent of financial institutions.”
Mr Pero adds that there are currently over 70 mortgage products available in New Zealand, and that mortgage brokers can help tailor the best financial solution and find the best service provider to meet their client’s needs.
Note to editors:
The survey was conducted on behalf of Mike Pero mortgages in May 2002 by BRC marketing and social research. Total sample size was 500, throughout New Zealand.
1 New Zealand Mortgage Brokers Association figures
2 Mortgage Brokers Association of North America statistic