house price crisis, with the national median price rising by over 23 per cent during the 12 months leading up to the end of October. This raised concerns among regulators regarding the raging market and the risks it poses to the financial stability, prompting the reintroduction of loan-to-value ratios by the Reserve Bank.
This has meant that starting from 1 November, first home buyers, who account for 75 per cent of borrowers with smaller deposits, have been facing a newly tough lending environment. While banks do have some ability to make low deposit loans under the new LVRs, most of them refrain from doing so, with some lenders like Kiwibank halting pre-approvals as well.
Despite these challenges, some experts are of the view that it is not impossible to get a low-deposit loan, as there are several options which borrowers can pursue. Firstly, they have the opportunity to take a loan with a deposit as low as 5 per cent, with a First Home Loan via Kāinga Ora, which allow selected lenders to offer lower deposit loans. According to a spokesperson for the Crown housing agency, since the LVRs were aimed at supporting first home buyers into homeownership, they are exempt from the new regulations. “If an application meets the criteria a lender has the ability to provide that loan within the scheme, but they are not obligated to. And the loans are not exempt from the CCCFA changes.”
However, rising house prices continue to remain a challenge here, since price caps have been introduced for homes purchased through a First Home Loan, and it is difficult to find properties beneath these limits.
Another options suggested by experts for first home buyers with smaller deposits is to purchase a new build property. They are heavily incentivised for first-home buyers, since KiwiSaver First Home Grants for them are higher, while they are also exempt from the LVRs.
Turning to non-bank lenders is another option recommended, as reluctance among New Zealanders regarding non-bank lending continue to change. Some of these financial service providers, like Liberty Financial, First Mortgage Trust, Resimac and Bluestone Mortgages are largely flexible around low deposit lending and are not subject to the LVRs. Jeff Royle, a mortgage advisor from ILender, said: “About 80 per cent of our turnover is through non-banks, as they have more of a can-do attitude around harder lending and marginal borrowers.”
