Home loan restrictions set to ease

LESS PRESSURE: Tough mortgage restrictions could be rolled back by the end of the year.PHOTO/PETE NIKOLAISON

Wairarapa first-home buyers could soon be back in the market, as the Reserve Bank announces low deposit lending restrictions could be scrapped by the end of the year.

The controversial measures have forced most home buyers to raise 20 per cent deposits, putting the property ladder out of many people's reach, amid claims provincial New Zealand was being unfairly targeted.

But in a speech on May 9, Reserve Bank deputy governor Grant Spencer said pressures in the housing market were easing gradually, and the lending restrictions were achieving their purpose.

"The volume of house sales has dropped considerably across the country, other than in Canterbury, and the slowdown in volume has also been reflected in prices."

The earliest date for rolling back restrictions was likely to be late in the year.

Wairarapa Home Loans consultant Matthew Spicer said the news was exciting for the Wairarapa.

"I know I've been affected by [the restrictions], and talking to other people in the provinces, they've been affected too."

It took a while for the lending restrictions, which kicked in on October 1, to have an impact locally. But within a few months, first home buyers were struggling to get a foot into the local property market.

Banks had relaxed their lending criteria in recent weeks, but throwing the lending restrictions out completely was the best option, he said.

"Scrapping it altogether will open up the doors again for so many people, so many of them being first home buyers. Or even just your average families who are desperate to get into the home loan market."

According to the latest QV figures, the average house value in Masterton dipped to $235,447 last month [April] - down 0.6 per cent from a year ago. The average house in Carterton was worth $253,819 - down 3.4 per cent, while the average South Wairarapa house value rose 5.6 per cent to $301,386.

The Reserve Bank introduced loan to value restrictions in October last year, limiting banks' lending to borrowers with less than a 20 per cent deposit to 10 per cent of new lending. Mr Spencer said without those restrictions, annual house price inflation might be 2.5 per cent higher.

Housing supply conditions had also started to improve and in Auckland progress was being made in freeing up the supply of buildable land and improving the consent process.

Labour's housing spokesman Phil Twyford called on the Government to "fine tune" the restrictions by applying them only to Auckland and Canterbury.

"Why should regional New Zealand continue to be punished for the Government's failure to fix the Auckland housing crisis and get the Canterbury rebuild happening?"

ASB economist Christina Leung said the Reserve Bank would not remove the restrictions unless it was confident the housing market was slowing on a sustained basis and that interest rates would sufficiently contain house prices.

Westpac chief economist Dominick Stephens said it was possible the restrictions' timetable could change if the housing market took off again. "But in our view that is unlikely to happen, with interest rates rising as they are." APNZ