As Kiwibank’s new CEO urges would-be first home buyers to step up to the plate so long as they can afford to, the Reserve Bank’s latest mortgage approval data again paints a grim picture of the housing market.
Just 4,621 mortgages were approved in the week ending October 8, the Reserve Bank says, down nearly 26% in the 13 weeks to October 8 from the same period last year. At NZ$590.8 million the value was down 27%.
The volume of sales was a new non-public holiday week low since the Reserve Bank series began in 2003, slipping below the 4,686 mortgages approved in the week to September 10 this year.
In an interview with interest.co.nz yesterday Kiwibank CEO Paul Brock urged potential first home buyers to take the plunge.
“I think at the end of the day there’s no right or wrong time to get into the (housing) market,” Brock said.
“The key is actually whether customers themselves can actually afford it, afford the loan. And that should be the primary driver.”
Brock said he was concerned first home buyers might be “stepping out” of the market.
More to consider than just affordability
Shaun Riley, CEO of Mike Pero Mortgages, said there had been a noticeable slowdown in the market over the past three months but interest from first home buyers appeared in line with the rest of the market. Riley said, in his view, there was more to consider for potential first home buyers than just whether you could afford to take the plunge.
“There are a number of other factors that may come into play when someone’s deciding about whether or not buying a first home is right for them,” said Riley. “It could be the family situation. Are they having a family, do they get one (a house) before they have a family, will they have one income in the future and will that make it unaffordable?”
Riley said that during the last 10 days Mike Pero had seen a noticeable pick up in inquiry levels, suggesting the housing market could see a spring bounce.
“Normally the school holidays are quite quiet, but we noticed in the second week of the school holidays we got a lift in inquiry and this week it has been a lot busier (again),” he said.
Riley noted that lenders had increased their loan to value ratios in recent months, which might kick some life into the market.
Big banks all prepared to lend more than 80%
Brock said Kiwibank had continued to lend more than 80% of a house purchase price to some customers’ right through the global financial crisis. Spokespeople for the ANZ and National Banks, ASB, BNZ and Westpac said they had, in selected cases, too.
Like Riley they too said there hadn’t been a drop off in the first home buyers market that was out of whack with the overall market, although one noted in the Auckland market that although applications had held steady, there had been a drop off in first home buyers actually drawing down their loans.
Mike Davy, ASB's general manager for lending, said the bank had a range of lending options for customers with a less than 20% deposit.
"Applicants will usually need to have at least a 10% deposit and be able to afford to make their loan repayments," Davy said. "Affordability of a home loan very much depends on each borrower’s own personal circumstances, including their income and outgoings," he said.
Tough times
A spokeswoman for the ANZ and National banks agreed with Riley that the last three months had been “particularly light.”
“To illustrate, the total of all banks' mortgage growth in March was NZ$670 million and in July this dropped to NZ$200 million,” she said.
“We would characterise the current situation as a ‘buyers’ market’ and buyers in general are not feeling under any urgency to commit to a purchase, including first home buyers.”
Another factor dragging on the first home buyers market in particular is thought to be unemployment, and the risk of it, in an economy that could sink back into recession. The last official figures showed June quarter unemployment at 6.8%.
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