First-home buyers lose price battle

‘‘We just had this deflating feeling that this market is moving faster than we can afford to save.’’

Matt Judd

After a long, costly and dispiriting search, Aucklanders Amy and Matt Judd are hoping their offer on a first home will go unconditional next week.

If it does, they will have bucked a trend of aspiring home buyers being granted pre-approvals for loans but not being able to find homes they can afford.

If they are successful, the couple will borrow from their Kiwisaver provider Simplicity but it said things were now so hard for firsthome buyers that one in five of its pre-approvals resulted in a loan being made.

Simplicity chief executive Sam Stubbs said that was because buyers were unable to find affordable homes.

Other lenders including Kiwibank, Westpac and Heartland were seeing a similarly low proportion of first-home buyer pre-approvals resulting in purchases.

Simplicity has so far granted $110 million in pre-approvals but made only about $23m in loans.

Between October and the end of December, Heartland did $303.6m home loan approvals through its online application process but that translated into $16.6m of lending, the bank’s recent half-year result showed.

Kiwibank said that between October and December 2020, just under one in four pre-approvals had progressed to a settlement, compared with nearly half of preapprovals in earlier periods.

Westpac said it had a one-in-four loan-to-application rate last year.

‘‘It is scary and it is disheartening,’’ said Matt Judd, a high school counsellor.

He and his wife, who is a dietician with a district health board, had tried to buy places but lost out despite going to the expense of valuations and building reports.

And each failure to buy left the professional couple watching prices, fuelled by historically low interest rates, rising faster than they could save, even though they were living with his parents.

‘‘It was really gutting. We just had this deflating feeling that this market is moving faster than we can afford to save,’’ he said.

In a few short months of massive price inflation, the couple found they no longer even had a 20 per cent deposit and family gave them a loan so they could afford the home they have made an offer on.

Judd said there was such intense pressure it was hard for first-home buyers to do their due diligence on places for fear of missing out.

Heartland Bank chief executive Chris Flood said about half of the bank’s online approvals were for aspiring first-time home buyers.

‘‘It is very hard for first-home buyers at the moment,’’ Flood said.

He said a large portion of the bank’s staff were under 35 and many had struggled to secure homes.

Simplicity and Heartland both aim to win home loan market share from the big banks, with Heartland offering the lowest one-year fixed rate on the market at 1.99 per cent, and Simplicity offering the lowest floating rate loan at 2.25 per cent.