People with low-deposit, pre-approved loans are racing to buy homes before new rules burn a hole in aspirations. Photo by Dan Hutchinson
The clock is ticking for some low-deposit home buyers in
the Dunedin market before their loan pre-approvals run out.
The Star looks at the uncertainty surrounding the city's
property market after tough new rules were imposed by the
Reserve Bank on October 1.
Mortgage brokers say there is a group of low-deposit Dunedin
house buyers racing against time to buy before their
pre-approved loans expire.
The Reserve Bank imposed new rules from the beginning of this
month, meaning banks must limit the number of loans they give
to buyers with less than a 20% deposit.
Government schemes such as the Welcome Home Loan scheme had
also changed their criteria from no deposit to a minimum
deposit of 10%.
Kiwi Mortgage Market managing director Brian Greer said many
of his company's clients who got their finance pre-approved
before the new rules kicked in were now ''far more
motivated'' to buy.
''They say `I have got my pre-approval; I know it lasts until
March next year; I am going to use it and I am going to go
and buy a property'. It will be interesting to see if that
has a short-term spike on property prices.''
The reality was that clients now either needed a 20% deposit
or a 10% deposit if it was through the Welcome Home Loan
scheme or one of the non-bank lenders, he said.
Joint owner and director of Mortgage Link Dunedin Glenda
French said many people were trying to buy just before the
''perceived'' date of the changes, but banks had changed
their criteria a month before October 1.
There were many pre-approved loans, although banks had
reduced the time frame on many of them to 90 days from 180
ASB Bank ended its pre-approvals for low-deposit loans on
October 4 and many people had been trying to settle on houses
last week, Ms French said.
''Some people have still got a pre-approval in place and, for
them, they are still in the hunt. For anyone else who doesn't
have a 20% deposit ... [banks] don't want to know about it,''
Ms French said.
Some banks were prepared to help loyal customers but most
were waiting until current pre-approved loans had been
cleared out of the system so they knew where they stood.
Real Estate Institute of New Zealand regional director Liz
Nidd said it was hard to say what impact the changes had had
on the real estate market.
She had received calls from second and third-tier lenders
(lenders not bound by the same rules as the big banks) asking
whether she would recommend them to her clients.
Living Corp real estate agent Shona McMillan said the changes
had made buying and selling homes harder.
Banks were taking longer to approve finance and in the past
two weeks she had had four or five buyers who had to have
their purchase agreements extended.
Mr Greer said ''the new environment'' would be clearer in
March-April next year when all low-deposit buyers with
pre-approved loans had left the market.
- Dan Hutchinson and Jonathan Chilton-Towle