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Mortgage broker backs call for LVR exemptions for first home buyers

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holiday-small2.jpgA mortgage adviser has backed calls from the Property Institute of New Zealand for first home buyers to be exempt from loan-to-value restrictions.

On Monday, the group which represented property valuers and commercial property managers said the restrictions had been a devastating failure which allowed property investors to snap up homes which families might have otherwise bought.

Statistics New Zealand figures released last week showed nearly 80 per cent of renters in New Zealand lacked the resources for a home deposit.

Under Reserve Bank rules, home buyers required a 20 per cent deposit.

Mortgage Express chief executive Sarah Johnston said she agreed with a move to exempt first home buyers from the restrictions.

Auckland was approaching a point whereby people would have to be subsidised to live there, she said.

"I'm totally concerned that we are just seeing the rich get richer.

"We're not seeing people in Auckland being able to get on the ladder at all, and yet that's where the work is."

The Reserve Bank released data on Monday which said lending to property investors in Auckland had fallen 18 per cent last month, after new lending restrictions were introduced the month before.

These included a requirement no more than 5 per cent of bank lending go to residential property investors with less than 40 per cent equity, and a measure to force banks to sharply restrict their loans to owner-occupiers with less than a 20 per cent deposit.

The Reserve Bank data said lending to owner-occupiers in Auckland also fell last month, to $1.86 billion from 1.88b.

Total lending across the country fell 3 per cent, to $6.11b.

Johnston said there needed to be a fundamental look at how first home buyers and what she called second chancers - someone who had owned a home but for whatever reason did not anymore - could get into the property market.

Earlier this year, changes were made to the HomeStart Grant scheme which increased the caps for a house to $650,000 in Auckland, and $550,000 in the rest of the country.

Income caps were also increased from $80,000 to $85,000 for a single person and from $120,000 to $130,000 for a couple.

The changes would also be applied to the Welcome Home Loans, which enabled first home buyers to buy with a 10 per cent deposit while being exempt from LVR ratio limits.

Johnston said these changes were unfair on professionals who had studied, got a big student loan, but after paying it off were not in a position to buy because their income was above the cap.

She said incomes should be tested at the beginning to mitigate concerns around any possible increase to interest rates.

But most people would not default on their own home, she said, with there being far more risk in giving a loan for cars or other cheaper assets.

"Let them have their first home, don't means test them on income.

"They will do everything and anything they can (to meet mortgage payments), what's the risk?"
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