How first-home buyers are getting low-deposit loans
Reserve Bank data shows there was $1.261 billion of new loans to borrowers with less than 20 percent equity or deposit in July, about twice the level of July 2019.
In July, mortgage advisers observed a significant increase in low-deposit loans, with $1.261 billion of new loans issued to borrowers who had less than 20 percent equity. This marks a notable rise compared to July 2019, where such loans accounted for only about 16 percent of all lending to owner-occupiers. Mortgage adviser Campbell Hastie of Hastie Mortgages explains that in 2021, approximately 25 percent of first-home buyers were operating with a low deposit.
He attributes this increase to the high prices in markets like Auckland's North Shore and Hibiscus Coast, where a first home can easily cost $850,000 to $1 million. Hastie notes that hitting a 20 percent deposit threshold is challenging, especially with savings and KiwiSaver. He observes that he rarely encounters borrowers with a 20 percent deposit these days, as even 10 percent of a million dollars is a substantial amount.
Low-deposit borrowers often face higher interest rates and fees until they reach 20 percent equity. Mortgage advisers suggest several steps to improve the chances of obtaining low-deposit lending, but the process can be more difficult for some than for others. Factors such as a clean account conduct, good savings history, and a solid income can positively influence a lender's decision.
Despite the challenges, experts like Bruce Patten from NZ Financial Services Group remain optimistic about the current market. He believes the increased availability of low-deposit loans reflects a favorable environment for first-time buyers, mainly due to their two incomes and lower price points.
Written by urgent.news from RNZ Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
