Home loan easing 'not enough for first home buyers'

The Reserve Bank says it will ease the lending restrictions on bank lending to home buyers and property investors from January. Photo / File

Easing the lending restrictions on banks will only make a minimal difference to first home buyers, a real estate industry body says.

The Reserve Bank this morning said it will ease the lending restrictions on bank lending to home buyers and property investors from January.

The change will increase the cap on banks from 10 per cent to 15 per cent for new mortgage lending to owner occupiers.

Currently no more than 10 per cent of loans can go to owner occupiers with a deposit of less than 20 per cent.

It will also ease the restrictions for investors.

At the moment only 5 per cent of lending is to investors who have a deposit of less than 40 per cent.

That will alter slightly to allow those with deposits of less than 35 per cent for no more than 5 per cent of investor lending.

Bindi Norwell, chief executive of the Real Estate Institute of New Zealand, believes easing lending restrictions will only provide minimal help to first home buyers. Photo / Supplied

Canstar general manager Jose George said the change was good news for first home buyers.

"But, with median house prices still climbing in most regions and uncertainty around mortgage rates, we don't think today's announcement will led to a surge in activity in this area of the market."

Bindi Norwell, chief executive of the Real Estate Institute of New Zealand (REINZ), said it was surprised and concerned that the loan to value ratio remained the same for first home buyers with most still needing to have a 20 per cent deposit.

"For some months now, the institute has been calling for a review for first time buyers to make it easier for them to get a foot on the property ladder.

"We constantly receive feedback from our members around the country that for many young couples, saving a 20 per cent deposit is just too much for them - especially when they're already paying rent.

"With a median house price of $530,000 in New Zealand, this means a deposit of $106,000 is needed. In Auckland, with a median house price of $850,000, this is a deposit of $170,000.

"Today's announcement only provides minimal assistance to help first time buyers who are desperate to achieve their property dreams."

Norwell said while the lift in the bank lending cap from 10 per cent to 15 per cent would make it easier for banks to be more flexible she questioned whether the banks would ease restrictions for first time buyers in line with the recommendations or keep lending at current levels.

Bruce Patten, a mortgage broker at Loan Market, said what impact the change would have really came down to the banks.

"They have definitely got the funds - but whether they have got the appetite to lend it..."

Patten said the banks were currently running at about 8 per cent of new lending to those with a deposit of less than 20 per cent - well short of the 10 per cent cap.

He said one bank was doing virtually no lending at under 20 per cent, another two were doing some lending to those with deposits of 15 per cent while a fourth bank changed from week to week.

Patten hoped the easing would encourage all the major banks to re-open their lending to those with a deposit of just 10 per cent and to firm up pre-approvals which would give buyers more certainty about how much they could borrow.

"I hope it will be enough. It is a pretty tentative door-opener."

Patten said he believed the cap should have gone up to 20 per cent for first home buyers with no change for investors.

He believed the change for investors - allowing a small number to have a deposit of under 35 per cent wouldn't have any impact.

"I think it is almost completely a waste of time."

But he said it was up to the banks now whether they relaxed lending or sat on their hands as they had for the past few months.

Mark Collins, chief executive of Mike Pero Mortgages, said the changes were so slight he doubted it was going to make much difference to home buyers.

"They way the banks are self-regulating...they are not lending as freely as they have in the last few years."

Collins said the cap increase would mean some first home buyers get through, more than before, but there would not be a significant uplift.

He said that was also a good thing as first home buyers were riskier than other borrowers.

Collins said the change to the investor borrowing limit was bigger than the first home buyer change.

For those with a portfolio of properties allowing more borrowing to those with equity of under 35 per cent could allow investors to buy another property.

"It's better for investors than first home buyers," he said.

Collins said even though the bank caps were increasing to 15 per cent he doubted the banks would go up to that.

"I think you will see them settle around 12 to 13 per cent," he predicted.

Ashley Church, chief executive of the Property Institute of New Zealand, said the loosening of the restrictions was not happening fast enough.

"While it's good to see that common sense has finally prevailed – the speed at which the Reserve Bank is proposing to relax the rules means the move will have very little effect.

Church said the loan to value restrictions had locked a generation of first home buyers out of the property market and now appeared to be causing a drop in the number of homes available to rent.

"These rules didn't just impact on first home buyers – they also locked investors out of the market – and the chickens let loose through that particular action are now coming home to roost."