4 minute read
Loan Market
How to maximise your chances of mortgage approval
The CCCFA (Credit Contracts and Consumer Finance Act) only came into force in December, and the credit crunch is already starting to bite. The legislation aims to protect vulnerable borrowers from loan sharks and requires lenders to scrutinise applicants’ financial history more closely. However, many home loan seekers have found themselves rejected by the banks. The latest data shows the proportion of successful home loan applications has dropped from 36% to 30%. According to media reports, grounds for refusal include too much spending on takeaways and Christmas shopping. The good news is that you can take action to improve your prospects even in a tightened lending environment. Here are some tips to give you the best chance of approval.
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Property market showing signs of recovery - what could this mean for buyers?
The first faint signs that the Kiwi property market is cooling have emerged, with good news predicted for property buyers. The number of homes for sale is back to pre-COVID 2019 levels according to realestate.co.nz but asking prices in some key centres have begun to dip. The latest data from the website says more than 23,000 homes are now on the market – the first time it’s hit this level since June 2019.
The housing stock in February increased 47% year-on-year. Just 12 months ago, Kiwi buyers had around 7,500 fewer homes to choose from. And just six months ago, the number of homes for sale was 12,249 – a 15-year low.
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Jason Lovell
Changes announced for First Home products
The Government has announced changes to the First Home Loan and First Home Grant products administered by Kāinga Ora, enabling more New Zealanders to access support to achieve home ownership.
The changes, which were announced on 19 May 2022 as part of Budget 2022, include house price cap increases and adjustments to the eligibility criteria.
Please see below for a summary of the key points:
CHANGES TO THE FIRST HOME GRANT
• House price caps for the First Home Grant have increased in many parts of the country, to align with lower quartile estimated values for new and existing properties. You can view the new house price caps here. • KiwiSaver requirements have been adjusted, to reduce the threshold amount of regular savings to access the grant. • A new income cap category has been introduced for ‘individual buyers with dependents’, with an income cap of $150,000. • Relocatable homes that have received a Code Compliance Certificate in the last 12 months can qualify as new properties – increasing the grant amount that applicants can receive. • Members of eligible Progressive Home Ownership rent-to-buy schemes can access the new build grant.
CHANGES TO THE FIRST HOME LOAN
• House price caps have been removed entirely for First Home Loans (income caps and lender requirements still apply), to provide applicants with a greater choice of properties. • A new income cap category has been introduced for ‘individual buyers with dependents’, with an income cap of $150,000.
The Government has also announced a change to the Kāinga Whenua loan scheme. The loan cap will be increased from $200,000 to $500,000, to provide more choice and opportunities for people building, relocating, or purchasing a home on whenua Māori. A deposit of 15 percent of every dollar borrowed over $200,000 is required.
The changes to the First Home Grant take effect from 19 May 2022. The changes to the First Home Loan and Kāinga Whenua Loan are expected to take effect from 1 June 2022.
Kāinga Ora - Homes and Communities are also contacting First Home Grant customers (those with pre-approved applications) to outline what the changes might mean for their situation. First Home Loan and Kāinga Whenua Loan customers will need to discuss their individual circumstances with a participating lender.
As a result of the changes, we are already experiencing an increase in the number of First Home Grant applications. While we will endeavour to process applications as quickly as we can, a reminder of our timeframes - we require new applications four weeks before settlement, and those with existing pre-approvals to submit all relevant documents two weeks before settlement.
For further information, please visit the Ministry of Housing and Urban Development website, which has supporting fact sheets with examples of households that could benefit from the changes.
Your clients might also be interested in our interactive First Home Decision Tool, which can help determine which products they could be eligible for.
Alternatively, please don’t hesitate to phone us on 0508 935 266.
We look forward to supporting more New Zealanders on their journey to home ownership.
Ngā mihi,
Jason Lovell
