Debt to Income Ratios (DTI) Policy is Gathering Momentum
The Reserve Bank has recently released a consultation paper to consider the impact of debt-to-income ratios on the market. I am personally quite positive about any measures that are there to protect our financial stability and limit our exposure to a financial downturn. However, if they impose it they need to ensure it does not inhibit first home buyers from getting on the property ladder.
They need to have, and design a specific policy that separates first home buyers from the rest of the market. We’ve already seen that the LVR rules have prevented first home buyers from getting on the property ladder in cheaper regions of the country - they can’t afford to buy in Auckland and would love to get on the property ladder. The new rules limit them from buying outside of Auckland as now they will need a 40% deposit for an investment property, even though it is still their first property. I believe first home buyers should be excluded from this RBNZ policy and, in the same line, I urge them to consider the impact of any further policies on first home buyers.
The decision on the DTI policy is likely to be finalised in mid-2018.
When the main banks do not want to do the finance, we might be able to provide an alternative solution. Here are a few examples of what we have done with non-bank lenders:
- Open ended bridging for clients to purchase a new residential home, pending sell down of existing dwelling. 6 months capitalised interest provided.
- Financing of a subdivision and construction loan on two properties with capitalised interest to allow client to complete the build, sell, and make a profit.
- Consolidation of debt and paying creditors, allowing client to tidy up their accounts, submit tax returns, before financing back to main stream bank.
- Finance to buy investment property with 30% deposit
The typical interest rate is between 5.7% and 9.5% for second tier lending.
Give me a call if you have any questions.