Getting a mortgage in today’s economy is no easy feat if you’re a first-time buyer. The Reserve Bank’s lending restrictions have put a dramatic squeeze on the housing market and shifted the goalposts for people trying to save a deposit.
It came as no surprise to learn that an idea was floated in the housing industry recently about whether or not the Loan to Value Ratio (LVR) should be relaxed for first-home buyers.
First introduced by the Reserve Bank as a tool to calm the housing market, LVRs mean most people now need to have a 20% deposit to secure a loan.
While you can use KiwiSaver towards a deposit and/or access a 90% LVR Welcome Home Loan to buy a house, it’s still much harder now than it was five years ago for young couples and young families to save enough to be approved by the banks.
While it’s a relatively blunt tool, the LVR has worked in slowing the housing market, with a 20% drop in listings reported widely last week in national media—which raises the very relevant question about what exemptions or help should be offered to first-home buyers.
While I believe there still needs to be some type of restrictions, allowing the banks to do more lending on loans with higher LVRs will make it easier to get a bank to say yes to a loan. Karen Scott-Howman, The New Zealand Bankers’ Association CEO, has stated that they’re always interested in discussing options and what the practical implications of any policy change might look like.
Despite the drop in house listings across the country, Kapiti is still experiencing high demand, making it even harder for first-home buyers in today’s climate. If the Reserve Bank were to review its LVR restrictions, it would help out the countless number of people we see who have good incomes, but not quite enough deposit.
I believe it’s also a good idea to discuss increasing the caps put on house value through Welcome Home Loans to make home ownership that bit more accessible again. Even lifting it by $50,000 across the board would make a tangible difference—in Kapiti that would mean it would be an option on existing homes up to the value of $550,000 or new-build homes would be at $600,000.
With the election now just weeks away, and housing sure to be on the agenda, we will be watching closely to see if the plight of first-home buyers is recognised by the politicians. If you’re still trying to get into your first home, we’re happy to talk through your options—get in touch and we can get to work.
Just on a final note I attended the NZ Professional Advisers Association Conference and 2017 Awards Dinner last week. Kapiti was well represented with myself a finalist in the NZ Mortgage Adviser of the year award, Tracey Jones won an Excellence Award and Dave Isaacs won the NZ Investment Adviser of the year award. Congratulations to our local stars in the advice industry!