Encouraging updates for Kiwi home buyers

Encouraging updates for Kiwi home buyers

It’s been a promising few weeks for many would-be home buyers, with both the Reserve Bank and Kāinga Ora announcing changes aimed at creating more opportunities within the housing market, particularly for those looking to purchase their first home.

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While the process of securing your first step on the property ladder may seem daunting, from saving for a deposit to navigating the complexities of an ever-changing property market, fortunately these recent announcements are working in your favour. And there’s some helpful news for property investors too!

Revisions to loan-to-value restrictions

The Reserve Bank has proposed changes to loan-to-value (LVR) restrictions, which could increase accessibility and affordability of home ownership for all buyers, but particularly first home purchasers.

LVR restrictions limit the amount of lending banks can provide to owner-occupier borrowers with less than a 20% deposit, with the intention of promoting financial stability and increasing resilience to market corrections. Under the current restrictions, lending to those with less than a 20% deposit was restricted to 10% of a bank’s total book of lending. Since implementation, this requirement has created a barrier for those looking to enter the property market.

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Set to come into effect from 1 June 2023 (pending consultation with the banks), the limit for loans with LVRs above 80% for owner-occupiers will increase to 15%, up from the current limit of 10%. In simple terms, banks will be able to lend to more borrowers with less than a 20% deposit.

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The revised LVR's are also good news for those looking to build a property investment portfolio; the proposed changes will allow you to secure loans with an LVR up to 65%, up from the current 60%, with the 5% limit on this type of borrowing remaining the same.

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This proposal could provide investors with increased flexibility in their investment strategies, while ensuring that first-time home buyers and owner-occupiers can remain competitive in the property market.

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What’s new with the First Home Grant and First Home Loan insurance premium?

What about the developments initiated by Kāinga Ora? If you’re not already aware, their First Home Grant and First Home Loan offerings are designed to help first-time buyers enter the property market by providing additional support.

From 15 May 2023, the First Home Grant house price caps will be adjusted to align with the current market. While most regions’ caps remain the same for existing properties, many now have higher grant limits for buyers looking to buy new builds. In addition, New Build price caps have seen small adjustments, with the largest coming for the Queenstown Lakes District.

Meanwhile, the First Home Loan insurance premium (designed to cover the cost of underwriting the low deposit loans) has been refined; the premium will halve from 1% to 0.5% from 1 June 2023, reducing the costs passed onto borrowers.

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What does this news mean? It’s time to explore your options

While some may seem like small modifications, these improvements could make a significant difference for those looking to take advantage of the current buyers’ market. When implemented back in November 2021, the LVR's were intended to slow down the steep house price jumps, so this easing is one sign that we are likely nearing the end of house price declines. In other potential good news, the inflation figures reported by Stats NZ last month showed a surprise drop in the annual inflation rate to 6.7%, when many economists expected around 7%.

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If you’re a first home buyer navigating your way through the myriad of options, it’s worth taking the time to explore these changes and see which options might help you achieve your property dreams.

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We have the expertise at Total Mortgages to support you throughout your home ownership journey. We are available for a free, no-obligation chat, and you can schedule a call online here.