The Reserve Bank of New Zealand is proposing to ease mortgage loan rules this month to give buyers a better opportunity to find finance.
It will allow lenders to increase from 10% to 15% the number of loans they can issue that require a Loan-to-Value Ratio above 80%.
The Reserve Bank imposed the regulation in November 2021 to try to pull back property prices that were running rampant. The regulation has also helped protect new owners who might have been caught out by rising interest rates.
A similar, smaller change is set to encourage investors back into the market.
Banks have been restricted on the number of loans they can issue to investors with less than 40% deposit or equity. Under the new rules, investors will need 35% of the transaction value.
The Reserve Bank, also known as Te Pūtea Matua, said “the risks to financial stability posed by high-LVR lending have reduced to a level where the current restrictions may be unnecessarily reducing efficiency”.
It observed it could only make this move because housing prices had tapered down due to a prolonged period of interest rate rises aimed at easing inflation.
Inflation currently stands at 6.7%, as measured in March, but the Bank wants that number reduced to 2% or 3%.
However, the bank said it did not want to impede “the provision of credit to some otherwise creditworthy borrowers, which is not proportionate to the level of risk we see”.
As an experienced agency in your area, we see this as a positive, encouraging first-home buyers and owners seeking to upgrade.
Many homeowners are still seeking a better mortgage deal to contain the impact of rising rates.
These top four tips may help if you are looking to refinance.
Your needs
Ask why you need to switch lenders. Are you looking for a lower monthly repayment, an adjustable mortgage rate or a fixed-rate deal that will give you peace of mind? Clear goals will help guide your decision.
Research
Aim for lower monthly payments and savings across the life of the loan. Contact a mortgage broker if you don’t have time to do the research.
Equity question
Do you know how much equity you have in your property? Lenders will focus on a Loan-to-Value Ratio, which is an accurate picture of your mortgage situation. If you bought more than five years ago, your home’s value has likely increased. The resulting stronger equity position can be leveraged when refinancing.
Costs
Fees often come with refinancing a mortgage. You’ll probably be charged for an application, a value appraisal of your home and closing costs. These all mount up. Be confident you’ll recoup these costs from the savings you should make when you refinance.