Loan figures confirm first-home buyer woes

NEW mortgage lending figures add to an increasingly grim picture for first-home buyers, an economist says.

More than $5.1 billion was lent in new mortgages in November, of which 9 per cent ($441 million) was at a loan-to-value ratio of more than 80 per cent.

But only a third ($146m) of the high-LVR loans went to first-home buyers, with the majority ($247m) going to existing owner-occupiers.

Investors accounted for the smallest share of high-LVR loans with $46m, just over 10 per cent of this segment of the mortgage market.

The breakdown of high-LVR mortgage lending by borrower category has only been available for four months, and it has been watched with keen interest due to the ongoing Reserve Bank restrictions on these loans.

Shamubeel Eaqub, principal economist at the New Zealand Institute of Economic Research, said it was hard to compare the situation to before the LVR limits were introduced because that level of data was not available at the time.

However, he said it was not surprising that most of the highloan-to-value lending was going to existing homeowners rather than first-home buyers.

Eaqub said the limits had led to banks lending over 80 per cent to high-quality borrowers, and most first-home buyers did not fit that description.

‘‘If you don’t have assets and you don’t have high incomes, getting a high LVR tends to be quite difficult,’’ he said.

‘‘The people who are left in the LVR market must be of high credit quality. Generally speaking, we’re talking about people who have built up equity or shown they are able to pay off a mortgage.’’

Eaqub said the LVR restrictions had made it tough for firsthome buyers, who already have to contend with soaring house prices in several parts of the country.

‘‘I’m not optimistic . . . because house prices have to fall a lot and credit conditions have to ease for first-home buyers.’’

But Property Investors Federation executive officer Andrew King said the LVR restrictions were not all bad news.

‘‘It means there’s an incentive – a necessity – to save a deposit and it means they don’t have to borrow as much, so it’s easier to repay and they get themselves out of debt faster.’’

Having to have at least 20 per cent equity also gave homebuyers extra protection in the event of a property market downturn, reducing their risk of falling into negative equity, King said. Only a third of high loan-tovalue-ratio mortgages lending is going to first-home buyers.