Young borrowers actively rate shopping

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.”

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.”

Comments from our readers

On 13 September 2013 at 11:40 am Jeff Royle said:

“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.”

This is totally inaccurate. Second tier and finance companies will not lend in excess of 75% let alone 90%.

On 13 September 2013 at 12:20 pm Kaushik Gorasia said:

Absolutely true Jeff... Unlike the industry prior to 2007 there are virtually no second tier lenders who will lend in excess of 75% So I do not really see any out for the first home buyer.

On 13 September 2013 at 12:51 pm Satish said:

I agree with Jeff.

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.

On 13 September 2013 at 1:21 pm Amused said:

As Jeff points out correctly second tier crowds usually tap out at 75% and RESIMAC are only going to be a short term option for borrowers up to 90% before they are oversubscribed. The same capital holding rules that apply to high LVR loans for the main banks also effect the smaller fringe lenders. Remember capital requirements are also increasing from 1st October.

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.

On 13 September 2013 at 1:45 pm Craig Pope said:

I agree Jeff. I rarely see house buyers borrowing from a finance company to top up deposits - it sounds good in theory but difficult and expensive in practice. If a borrower's income is that high it can sustain this scenario (borrowing money from a finance company for a deposit), they have usually saved at least 5% or have 10% already. Then we can usually make things work by other means without having to borrow from finance co's.

On 13 September 2013 at 2:41 pm Andy said:

The headline is slightly misleading (Watch out for the FMA)!

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).

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

Comments from our readers

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