Some boost for first time buyers from new rules

Mortgage brokers expect new lending rules will mean little for property investors in Christchurch, but some first-home buyers should benefit.

The Reserve Bank will slightly relax lending restrictions from January 1, allowing banks to make more loans to homebuyers with deposits of less than 20 per cent of home value. Instead of 10 per cent of bank lending, low-deposit mortgages for homeowners can now make up 15 per cent of lending. Ninety five per cent of property investors’ borrowing will require at least a 35 per cent deposit, down from 40 per cent.

Reserve Bank Governor Grant Spencer said the bank would monitor the impact of the changes and make further adjustments ‘‘if financial stability risks remain contained’’.

Broker Jeremy Meachem, of First Place Mortgages, said quite a few homebuyers would find it easier to get a mortgage.

Banks had tightened their rules and did not want riskier clients, but would now have more funds for homebuyers with smaller deposits, he said.

Meachem said only about seven per cent of mortgage lending had been to low-deposit borrowers, but this would now rise. ‘‘It will definitely be easier.’’

He did not expect an impact on investors.

Mortgage broker Rob Parsons of Mortgage First described the changes as ‘‘very modest’’ and he did not expect a major impact on buyers. Banks could afford to be choosy about who they lent to, but most young buyers were realistic and prepared, he said.

‘‘We are seeing a lot of firsthome buyers, and there are plenty of homes for them to choose from.

‘‘Most of them realise that they need a good deposit, and many are using Kiwi-Saver or the bank of Mum and Dad as well.’’

Parsons noted that major postquake house building in Christchurch, plus freer lending on new homes, meant more first time buyers could afford to buy new.

Property valuer Natalie Edwards, of Urban Edge Valuations, said a big rise in the number of low-deposit mortgages was unlikely, because banks had their own restrictions, regardless of Reserve Bank rules.

‘‘The change may make it a little easier to get some loans across the line, but it’ll be steady as she goes and I can’t see a major upswing.’’

Edwards said flat house prices, falling rents and extra compliance costs meant buying for investment was unattractive.

‘‘I don’t think the investors are going to be rushing in. That part of the Canterbury market is pretty subdued and this won’t have a significant impact.’’

Records showed house prices had stabilised and rents fallen in Christchurch as earthquakedamaged or red-zoned homes were replaced, and others repaired. Average rents in the city had fallen nearly 20 per cent from a peak of $433 in February, 2015, to a low of $354 this September.

The Real Estate Institute reported the median October Christchurch price was $455,000, up two per cent in a year. The city’s average house value, according to Quotable Value was $490,000, down about one per cent in a year.