First-time home buyer has been borrowing since last year

Owners’ appetite for investment property did not change much towards the end of last year, still accounting for around 17% of all borrowing.

Reserve Bank data showed investors had a slightly stronger appetite for real estate, borrowing $1.3 billion in October but rising to $1.53 billion in November. But their activity remains relatively stable and their share of purchases remains significant.

Homeowners or investors accounted for 16.9% of all new mortgage commitments in New Zealand in November, almost level with October’s 17%.

Total new mortgage commitments from all types of borrowers totaled $9.1 billion in November, up 18% from October last year.

There are glimmers of hope for a category of buyers that the government is trying to encourage.

First-time homebuyers borrowed $1.7 billion in November, up $286.5 million from the previous month and 8.3% from a year ago.

New mortgage commitments to other homeowners rose from $4.9 billion in October to $5.7 billion in November, and increased 6.5% annually.

Kelvin Davidson, CoreLogic’s chief real estate economist, said homeowners find the lending restrictions tighter.

He sees three key trends in the latest data.

“First, the overall lending figure was still strong at $9.1 billion, slightly lower than the same month in 2020 of $9.3 billion, but still the fourth highest monthly total on record,” did he declare.

Lending strength has been driven by homeowners – first-time home buyers and other types. Investors are generally on a steady downtrend.

“Obviously this will reflect the 40% deposit requirement, tighter tax rules and probably also the changing economy, with property yields now quite low and costs rising, particularly mortgage rates. “, did he declare.

Second, the breakdown of loan numbers by loan-to-value (LVR) ratio. This data measured what borrowers wanting more than 80% LVR got and showed that $640 million went to first-time home buyers, $177 million to investors, and $824 million to all. types of borrowers.

Third, there were signs that first-time home buyers were driving the overall easing of high LVR loans to homeowners in November.

High LVR loans as a proportion of total first-time home buyers in November fell quite sharply, from 42.5% in October to 36.8% in November. It was the lowest figure since April, Mr Davidson said.

From November 1, 10% of bank loans can be granted to owner-occupiers with less than 20% deposit or equity.

Banks had been allowed to make up to 20% of new loans to homeowners with a loan-to-value ratio above 80%.

In March 2021, $10.4 billion was borrowed – the most for any month last year.

The November 1 LVR restrictions came after the Reserve Bank began consultations over fears that house prices could remain unsustainable.

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