Banks have tightened credit criteria significantly since the COVID-19 pandemic struck, but Loan Market mortgage adviser Paulette Trotter (pictured) says first home buyers still have a good chance of getting on to the property ladder - particularly as buying a home under current interest rates often works out cheaper than renting.
Trotter says that while the pandemic threw up many challenges in the form of delays from banks and valuers, it has also never been cheaper to borrow money - and with travel off the table, Kiwis are saving more than they anticipated.
“I think this year is going to be even busier than the last, and I think we’re likely to keep seeing growth for the next couple of years,” Trotter told NZ Adviser.
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“Delays are the biggest challenge for us right now - banks can be 10 to 15 days behind in processing applications, and first home buyers entering auctions is also a challenge.
“Despite this we’re still getting some great approvals from the banks, and while there are always challenges with credit and risk appetite, that’s understandable when we’re going through a pandemic.”
Trotter says that credit criteria tightened immediately when the first COVID-19 restrictions came in early last year, with first home buyers and self-employed customers facing a particularly tough application process. However, she says buyers with less than 20% equity can still secure some good deals, and rates are much cheaper than they were as little as two years ago.
“What tightened up immediately was that no banks would do less than a 10% deposit,” Trotter said.
“That of course eliminated some first home buyers. There are also more restrictions around new builds - some want them to be built within 12 months, and others want a 15% deposit for a new build.”
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“For self-employed people, some banks wanted a cash flow forecast to see how COVID-19 had impacted the business,” she continued.
“That’s something we’ve never had before if the client has had a few good years of history, but we just have to roll with the changes and give the banks what they need to help our customers.”
“Despite this, interest rates are still low,” Trotter added.
“With one of our banks, for example, a first home buyer with a 10% deposit can get a rate of 3.04% as of today - a few years ago, they were in the mid-4s to 5s. So it’s still never been cheaper for customers to borrow money, and for first home buyers, invariably it’s still cheaper to buy your own home than to rent.”