New Mortgage Rule Will Help Some First-Time Home Buyers

The Reserve Bank is set to relax their lending restrictions from 1 January 2018, which will give banks the ability to lend more loans to homebuyers with deposits of less than 20% of a house’s value. This change is expected to make it easier for some first-time homebuyers to obtain a mortgage, but shouldn’t affect property investors a great deal.

The new mortgage rule means that low-deposit mortgages will be able to make up 15% of a bank’s total lendings – an increase from the current 10%. Banks will have more funds for homebuyers with smaller deposits, which is good news for those wanting to hop on the property ladder. As for property investors, 95% of those who are borrowing will require at least a 35% deposit, down from 40%.

Reserve Bank Governor Grant Spencer said the bank would monitor the impact of these changes and make further adjustments “if financial stability risks remain contained.” However, not everyone sees these changes as an important move on the chess board. Mortgage broker Rob Parsons of Mortgage First described the changes as "very modest" and he did not expect a major impact on homebuyers.

Urban Edge Valuations property valuer Natalie Edwards agreed, saying that a big rise in the number of low-deposit mortgages was unlikely, due to banks having their own restrictions regardless of Reserve Bank rules. “The change may make it a little easier to get some loans across the line, but it’ll be steady as she goes and I can’t see a major upswing.”

To find out more about securing a mortgage for a first-home, contact your local bank. You can also review and compare mortgage rates on glimp, a comparison website for broadband, power, insurance and different types of loans. You can use the mortgage comparison service to find the lowest mortgage rates in New Zealand.

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