Firstly, if you already have a mortgage or a decent amount of equity in your home there is nothing to worry about. If you are about to buy, sell or even look to top up your mortgage then you need to be aware of the changes.

In order to slow the rate of housing-related credit, the Reserve Bank has stepped in by restricting banks abilities to lend at high loan-to-value ratio levels.  Banks will now be required to restrict low deposit lending considerably,  being limited to a maximum 10% of their new lending by dollar amount on low deposit loans– that is any lending over 80% of the property values.  Lending at these levels  will still happen, but banks will be more circumspect as to who they give low deposit loans to.

Basically for the majority of New Zealand borrowers, you will require at least 20% of the required cost as a deposit.

So what do I think – well to befrank I think it’s a broad brush approach that is only going to ‘hurt’ andaffect the middle New Zealand borrower and first home buyers.  Currently first home buyers and low incomeearners can access KiwiSaver ™ and the Welcome Home Loan™ schemes (featured onour fact page overleaf).

No one can argue that areas suchas Auckland, and potentially Christchurch, are seeing inflated house prices - andthis needs to be addressed. However creating a situation whereby the entirecountry pays for the problems in specific areas is simply not the answer, northe solution, in my view.

In my opinion, a better and morepalatable option would be to allow a 5% minimum deposit for any property purchaseunder $500,000 and for any property purchased over $500,000  a 20% deposit would be required.   This is simple and addresses the issue athand.  What’s more it is easy toadminister as opposed to the cumbersome administrative nightmare of policingthe adopted policy. 

It appears the Reserve Bank did not favour such an idea as it targeted specific geographical areas! That’s like saying – there is a wart on the end of your nose so we will cut off your head because we don’t want the nose to feel like it’s being picked on!

However frustrating it may be,these are the new regulations and we have to live with them. But rest assuredwe are working even harder for our clients.   Now more than ever it makes sense to use ourservices as your mortgage adviser – remember we have access to most lenders inthe market.

And like anything in life –there’s always a solution.  With other lenders besides mainstream banks NOT being regulated in this fashion, there are still opportunities to purchase a home with a low deposit.

Sometimes it’s not a case of who you know, but what you know  - so give us a call to discuss how these changes could impact your next borrowing decision.