Total Mortgages
New rules make securing finance tough but not impossible for first home buyers

New rules make securing finance tough but not impossible for first home buyers

Words by
Jordan Cameron

In our last update we discussed how the Reserve Bank’s latest lending restrictions, in place from November 1, were set to make securing finance tough for first home buyers.

With the Reserve Bank changing the amount of high loan-to-value ratio (LVR) lending permitted, banks were required to cut new lending to owner-occupier borrowers who have less than a 20 percent deposit, to just 10 percent of their total new lending. Since then, we’ve seen the rules hit first home buyers hard, making securing finance challenging – but not impossible.

What we’re seeing in the market

Following the announcement, we’ve seen major banks including BNZ, ANZ and Kiwibank stop all lending to those with a 10% deposit, only lending to LVR-exempt properties like new builds.

This has made it close to impossible to get a pre-approval on an existing property with less than a 20% deposit. We’ve had clients who have unfortunately had pre-approvals cancelled, or once they expire they will be unable to secure finance again.

The banks who will still do high LVR deals, such as ASB and Westpac, now won’t do pre-approvals, instead requiring buyers to be under contract. Once they sign up for a property, we’re seeing prospective buyers having to lock in a longer finance clause, around 10-15 days, so they can get all their documents together and submit them during this period.

This does effectively rule these first home buyers out of properties going to auction, which are still favoured by many vendors while the market remains hot.

With first home buyers being a significant market segment, we may start to see more properties marketed with a fixed price as we enter 2022, and vendors might need to be open to a longer finance clause to ensure a sale.

Don’t lose hope, we can still help

While we know this news is not ideal, those with less than a 20% deposit should not lose hope. It’s important to still reach out to us, so we can do an initial finance assessment for you. This will provide a better picture of your personal situation, and we can advise if there’s anything you should do to better present yourself to the banks.

We have a few clients at the moment in this situation, who haven’t yet provided documents to us as they expire within 30 days. Once they find the right property, they will be able to provide us their documents and we’ll look to arrange finance. We’re also seeing more parents looking to act as guarantors, to help secure a loan for their children.

Looking forward

It is tough to forecast what might happen in the new year, as the market has never been this uncertain. Homeowners with interest rates coming off their fixed-term should look to secure their new rate as soon as they enter their 60-day period, as rates continue to fluctuate and trend upwards.

We’ll look to keep you updated in 2022, and remember we’re always here to talk through any questions or concerns you might have.