Outlook for first home buyers following credit changes

There’s no doubt it’s been a tough few months for first home buyers.

First, there was the tightening of LVR (loan to value ratio) restrictions, reducing the amount of low-deposit lending banks can make. In December, the CCCFA (Credit Contracts and Consumer Finance Act) ushered in strict new lending criteria. And finally, stock market turbulence has seen many KiwiSaver balances nosedive, affecting those planning on using their funds for a house deposit.   

CoreLogic’s Buyer Classification data shows that these changes are really starting to bite first home buyers. In January, first home buyers made up 24% of purchasers compared to 26% at the same time last year.

Furthermore, data from credit reporting agency Centrix shows the percentage of successful home loan applications dropped from 39% in October to 30% in December. First home buyers likely make up a big chunk of those missing out.

In addition, the cost of living is steadily increasing as inflation continues to rise. And with war in Ukraine, stock market turmoil is guaranteed, at least in the short term.

However, it’s not all doom and gloom.

CoreLogic’s data shows some glimpses of light. Although first home buyers’ market share dropped in Auckland, Wellington and Christchurch, other parts of the country saw different results. Activity from first home buyers increased in Dunedin and Tauranga, while Hamilton held steady.

Plus, there are definite signs the property market is slowing and house prices are easing. Many real estate agents have reported a slowdown in interest at auctions and a dampening of expectations. Listings are also on the up, increasing choice for all buyers while building consents have reached record highs.

Furthermore, the government has announced a review of the CCCFA to address the ‘unintended consequences’. Many would-be borrowers have been turned down for spending too much on the likes of Netflix and UberEats. Initial advice from the review is due out any day, followed by a more comprehensive analysis in April.  

Hopefully, the review delivers some good news for borrowers.

However, while the long-term outlook has some encouraging signs, that’s of little comfort to Kiwis looking to buy their first home soon. And that’s where the expert help of a mortgage adviser can make all the difference.

From navigating the lending landscape to getting your mortgage application shipshape, your Loan Market adviser supports you at every step. Contact us today for personalised expert advice.