Young borrowers actively rate shopping
Latest data from New Zealand’s leading credit bureau shows house-buyers 28 years old and under are enquiring for mortgages at rates not seen in the last seven years.
Friday, September 13th 2013, 11:23AM 
7 Comments
Veda’s managing director John Roberts says this is evidence that first home buyers have been shopping around for mortgages so they can buy before the low-equity home lending restrictions come into force on October 1.
The data shows Gen Y inquiries for mortgages increased by a massive 51.25% in August compared with August 2012.
“We have never seen an increase in applications like this – the data is compelling evidence that first home buyers are trying to buy before the Reserve Bank restrictions effectively limit the number who can buy with a 10% deposit or less.”
Roberts believes the Reserve Bank’s high loan-to-value ratio (LVR) lending will deliver a spike in borrowing and a spike in housing sales.
“With limited supply that means prices for first homes could well increase.”
Veda’s data also hints at how people may circumvent the LVR restrictions.
Personal loan inquiries increased by a significant 23.58% in August compared with August 2012.
“It is well known that house buyers who don’t have a large enough deposit to get a mortgage from a mainstream bank will borrow the deposit from a second tier lender – like a finance company.”
“It’s early days but indications are the Reserve Bank’s high loan-to-value ratios may have limited impact on Auckland’s housing bubble.”
| « LVR move's effectiveness uncertain: Wheeler | It's not just home loans that maybe counted in LVR numbers » |
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Comments from our readers
Second tier lenders come to the party only if the LVR is less than 75%.PERIOD.
Reserve Bank's LVR limits has not shut out a generation of first home buyers entirely.It has only made the road difficult.Prospective borrowers with a genuinely saved deposit of the minimum 5% and with a sound application can still obtain lending in the 85% - 90% LVR space.
If people think they can get around these LVR restrictions by borrowing a 20% deposit etc from a second tier lender (or finance company) and THEN go to a mainstream bank for the remaining 80% they are kidding themselves. The main banks will still look at where these deposit funds are actually coming from and if its been "borrowed" then they will not approve the loan. The Reserve Bank has made it clear that this is not going to be allowed as a "work-around"
Lots of misinformation on this subject especially from people who aren't even lenders.
They are not shopping for rates - they are shopping for mortgages at higher rates ("enquiring for mortgages at rates not seen..."). However, those who ARE shopping on rates alone clearly need educating in the other components to a good home loan (terms, flexibility etc).
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This is totally inaccurate. Second tier and finance companies will not lend in excess of 75% let alone 90%.