Home Loans Today | Mortgage | Home Loans| Life Insurance
Mortgage Interest Market Monthly Summary

Home Loans Today interest rate up date for November 2014

July 10, 2015 by · Leave a Comment 

Home Loans Today

Interest Rate up date for November 2014
The property market has certainly picked up over spring, however there is a lot of comment around the Loan to value ratio restrictions imposed by the Reserve Bank in October 2013, and its effectiveness in dampening the market.
The Loan to Value ratio restrictions imposed were designed to slow the market and reduce the exposure of first home buyers if the market was to fall.  In September 2013, 80% + LVR lending accounted for 25% of all lending, and this was expected to climb.  The restrictions meant that 80% + LVR lending could not exceed 10% of a lender’s total loans.  The result is that 80% + LVR lending is now running at 8.4% of total lending.

As a result of the restrictions, those most affected were first home buyers who had trouble raising sufficient deposit to enter the market.  This in turn opened the door to property investors as there was less competition for homes in the lower price ranges.  Property investors were able to increase their portfolios at the expense of first home buyers.

In the meantime property values have continued to rise bringing into question the Reserve Bank’s decision to impose LVR restrictions.  However there has until now been a cooling of the market in relation to new listings that may be due to restrictions in the LVR.

If the LVR restrictions were to continue, this would further exacerbate the plight of first home buyers who have been shut out of the market.  Young couples without sufficient deposits would be facing a lifetime of renting, which was not the original intention.  Alternatively both lenders and borrowers have become more creative in structuring loans around security offered by generous parents.

There is speculation that the lending restrictions will be relaxed and this is the subject of a select committee hearing to be heard on 11 November.

The general feeling in the market is that the LVR restrictions have not had the desired impact, and that market forces will create a more level playing field in future.  Markets adapt and we are seeing development on the fringe of our larger cities, like the new builds in Pokeno south of the Bombay Hill.  We may see a growing trend of the baby boomers cashing up and moving to the provinces.  This could ultimately stabilize prices as more properties come to market for this reason.

Those returning from overseas or migrating to New Zealand will always create a demand for property in areas of high employment.

It is, as always, a question of supply and demand.  This over time will have a levelling effect, and is an effective way in self-regulating the market, rather than Reserve Bank intervention.

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!

Home Loans Today | Mortgage | Home Loans| Life Insurance