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First Home Buyers And Investors Still Backing Off

Mortgages.co.nz and Tony Alexander’s June mortgage advisor survey reveals an easing off in demand for home loans from first home buyers and investors, two groups that have been keeping New Zealand’s housing bubble afloat for months.

Each month Tony Alexander surveys mortgage advisors throughout New Zealand to get a groundswell view of what’s going on. Changes in buyer behaviour show up at this storefront level long before they make an impact on official datasets.

“This month advisors have again noted that they are seeing fewer first home buyers and investors. But the intensity of the easing off in demand has reduced slightly for both groups, whilst the increasing discussion about interest rate changes may account for a lift in enquiries about refinancing,” says Alexander in the latest report.

He goes on to comment that “people contemplating the biggest financial decision so far in their lives are feeling uneasy”, and “53% of respondents in this month’s survey reported a decrease in the number of investors coming forward for mortgage advice.”

For both groups, Alexander offers logical reasons. He suggests that investors are concentrating on selling less desired properties to reduce their debt, so aren’t energetically hunting for additional properties. And he reports that banks are making it harder for first home buyers in some regions, as they are using their current UMI (uncommitted monthly income) and assessment margins, plus a DTI (debt-to-income ratio) during assessments. Extended mortgage pre-approval turnaround times are also a problem for first home buyers.

Another trend picked up by the survey is a substantial jump in enquiries about refinancing – to a net 25% from -3% last month. Just 30% of advisors say the one-year term is the favourite of borrowers, despite banks slightly reducing that rate. Now, all eyes are on the five-year rates. Two months ago, a fixed rate of 2.99% was typical for five years. Today it’s more like 3.69%. And the new favourite is a three-year term.

From individual regions, there are some interesting goings-on:

  • Auckland - more borrowers are looking to fix on longer terms (3 to 5 years).
  • Bay of Plenty - many investors are considering commercial property purchases rather than residential.
  • Waikato - more clients are looking at refinancing, as they are fed up with their existing bank.
  • Wellington – more people are considering new builds for both owner-occupied and rental properties.
  • Canterbury - banks are shutting down to over 80% LVRs and new-to-bank clients, and preapproval assessment times are stretching out.
  • Otago – agents often have no listings to sell, other than those ‘problem properties’.

The full report can be seen at mortgages.co.nz

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