New deposit rules for home loans…

Due to demand being high in certain areas in NZ, the Reserve Bank has released new lending restrictions on low deposit lending. The minimum deposit requirement for first time buyers is now 20%. This may be reduced for low risk first time buyers ie those with high income, no debts (student loan OK) or hire purchase to pay off. Around 10% of all home loans per month can be to people without a 20% deposit.

That’s the cold hard facts out of the way! I must admit this has come as a bit of a blow to Mr M and I. One of the reasons for leaving the UK was to get on the property ladder as this was proving difficult in the UK for the same reason. Now we have ended up in a similar situation!

This is something to consider to potential migrants when coming to NZ. The rules apply for the bigger cities at least, perhaps the rules might be more lenient in smaller towns. Christchurch’s housing market is overheated due to the earthquake. Lots of houses are uninhabitable meaning those people who once lived in them have to find somewhere else to live. Mixed in with new immigrants coming in to help with the rebuild demand is currently very high. From what I understand in Auckland lots of investors are coming in and purchasing property way above market value pushing prices up for everyone else. The problem seems to be worse in Auckland and property prices are generally higher meaning that 20% is tough to achieve for most people with a decent income. If owning your own home is important to you then this is something to think about. For some people it may not be too bad if selling property in the UK and, therefore, have the 20% to put down.

For us it may still be achievable. Our income mixed in with fairly low rent allows us to save a good chunk of money each month. Also, areas outside of Chch don’t seem so badly affected. The prices are still over inflated but not by as much and are generally cheaper. This is where we will be focusing our search. And there is quite a lot of choice outside of Chch and due to commuting being a breeze it’s not all bad.

Hopefully the Government will see sense and lift this ban. It’s not going to solve an overheated market, but freeze first time buyers out of the market. Much like what happened in the UK. There is a “Welcome Home Loan” that people can use, which is a Government initiative to get buyers into their first homes with only a 10% deposit. Most migrants wont qualify as you have to be an NZ citizen or permanent resident for more than two years.

Fingers crossed the rule is revoked!


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