Increase in high-risk mortgage lending

First-time home buyers may be on the comeback trail, according to the Reserve Bank’s latest mortgage figures.

First-home buyers borrowed $910 million during July out of a total of $5.5 billion, one of their strongest showings in five years.

Other borrowers were more established owner-occupiers, property investors and businesses.

More tellingly, high-risk mortgages – loans with less than 20 per cent equity – made up 8.7 per cent of all new lending, the highest level since October 2013, when the Reserve Bank brought in loan to value ratios (LVRs) to cool the property market.

Generally would-be home buyers must have a deposit of at least 20 per cent, but banks can exercise a limited amount of discretion to those with lower equity.

CoreLogic’s Kelvin Davidson said the figures suggested credit was starting ‘‘to loosen just a little’’.

But Liz Kendall, an ANZ economist, cautioned that it could be a seasonal blip. There had been a ‘‘tick up’’ in high-risk LVR loans in March but generally the loan market seemed stable, particularly in the property investor camp.

Glen McLeod, co-founder of mortgage brokerage Edge Mortgages, said things were still very tough for first home buyers who did not have their 20 per cent.

‘‘I’m not doing that many [mortgages with an LVR of] over 80 per cent, unless they’re Welcome Home Loans.’’

Housing New Zealand’s Welcome Home Loans can borrow up to 90 per cent of a property’s value.

McLeod said it was almost impossible to get a pre-approved high-risk mortgage from mainstream banks, and non-bank lenders were ‘‘not pushing the boat out’’ either.

First-home buyers needed to have a sale lined up, and sometimes had to find the last 10 per cent by taking out a second, more expensive mortgage.

Conditions eased slightly for would-be property owners in January. The cap on lending to those with LVRs of more than 80 per cent was raised from 10 per cent of banks’ loan books, to 15 per cent.

And restrictions on investors were also relaxed a little, allowing banks to do 5 per cent of their lending to property investors with a less than 35 per cent deposit. Previously the deposit had to be 40 per cent.