Yesterday the ANZ National Bank announced property loans will now have to have a 20% deposit. Now this closes up the banks and means that lending in throughout New Zealand is tightening up and buying is becoming a lot more difficult. The 20% deposit in many cases will now need to be savings which means that gifting or using equity from another property is not going to be accepted by the banks. The banks are saying even if you want to buy a rental investment home they want to see at least 10% savings from your bank.
This is going to a have huge impact on the first home buyers market. For an average home in Christchurch which is sitting around the $300,000 mark, under these new conditions a buyer will now need to have clear savings of $60,000 before the banks will look at doing a loan. A few years ago you could get in with 5% deposit which will have been $15,000, and there were many lenders doing it for less than this.
Generally speaking, we will not be offering new lending in excess of 80 per cent LVR(loan to value ratio. In some specific circumstances we may be in a position to lend above 80 per cent but customers will be required to demonstrate an undoubted ability to service the loan in the event of changed financial circumstances.
This is the official statement from the ANZ National Bank:
* For all new lending, we will be ensuring that both the bank and the customer understand the value of the property in question. Where we do lend beyond 80 per cent LVR, we will require a new registered valuation.
* We will continue to consider LoDoc (low documentation) but to a maximum of 60 per cent LVR.
* We will continue to support our residential investment customers but are unlikely to lend above 80 per cent LVR. For all new residential investment lending applications, we will seek a registered valuation will be required where the LVR is greater than 75 per cent.
* This comes into effect on Thursday 27 November and applies to all new lending applications. Existing lending arrangements and commitments will not be impacted.
* This applies to ANZ and The National Bank.
If you’re a first time buyer and want to buy a home you need to save. We have come off a number of years where things have boomed and as a part of this have naturally adopted a society of spending and consuming. There are huge amounts of temptations out there to spend money on, there are countless amounts of gadgets that are constantly evolving and needing updating, flash cars and the temptation to spend mega money on small do up projects. These things have been a way of life for many but if you want to buy a home in todays market, even though prices are falling you will need to save. This is so that you can both have enough money for the deposit for a loan and then to demonstrate to the lender (the bank) that you can save and service the loan.
What effect could this have on the already unstable market that is looking for buyers. There is a huge supply of houses on the market and with very few sales already it might just make it harder to find that buyer who can buy your house.
If you are a first home buyer talk to your mortgage broker or bank manager, they can help you clear up any questions you may have and even maybe able to set you on a path to achieve what you want. Talking to my broker today banks will stray from these harsh lending criteria but only on a case by case basis. It may mean that you will need to get gifted some money from your parents to top you up for a loan, it may mean they need to have take out small loans or borrow back on their own equity if they have some. There are options. Its now just a matter of being more creative and committed to saving for that deposit.