Two months under new LVR Regs

The change the Reserve Bank of New Zealand has made to high loan to valuation lending has had an effect and the Bank is seeing a reduction in this type of lending. In a press release at the end of November reviewing the first month of lending under the new rules the Bank reported that high LVR lending was down to 11.7% for October 2013. In the previous month the ratio for this type of lending was at 25.5% and in the middle of the year 30% of the loans approved were at 20% or less. The bank has set them selves a six month period to see what effect the change has had on house prices.

Currently the reporting is done on a national basis but they are expecting to see regional reporting in future. The focus and the changes the banks want see are a reduction of credit in these areas and also a slow down of the housing market. While we have no details of what type of lending is happening locally we do have a bunch of stats of what we are seeing in the local property market.The local market we would say has been flat since the 1st October, with the number of sales in the high 70′s for both months, down from 90 sales in previous months. The reduction has shown in the dollar value of sales within October and November as being at $31 million and $30 million. In the middle of the year sales were nearing the $35 million dollar mark.

When looking in detail at the quantity of properties being sold in the various price bands, the sales made for properties under $270,000 have shown a significant reduction from the middle of the year. The most sales locally made occur above $270,000 and under $450,000. This band has also seen a reduction of 30% since the middle of the year. When reviewing monthly median price values while there has volatility in the price obtained if we apply a trend line the results show the trend line to be almost flat. Our conclusion is that after two months of reduction in high LVR lending there is a flow on effect happening with a reduction in sales and a stabilising in pricing. Properties are still being sold and the big positive is how quickly sales are happening with time in the market to achieve a sale down from 30 days in the middle of the year to 20 in the last two months. The other positive being is that there is more choice currently with a greater number of properties available.

The other area we see a growth in is borrowings under the Welcome Home Loan Scheme. The Scheme is a government funded assistance plan managed by Housing New Zealand which is excluded from the Reserve Banks high LVR restrictions.

Here’s a table of Welcome Home Loan stats by Housing New Zealand of loans settled, for the past year over the Country. You can see the increase quite clearly in October and November of this year.

2012/12        92
2013/01        56
2013/02        55
2013/03        61
2013/04        52
2013/05        84
2013/06        52
2013/07        85
2013/08        90
2013/09        62
2013/10        135
2013/11        201

As you can see first home buyers are using Welcome Home Loans as a means of getting into their first home.

At Ergo Mortgages we welcome your enquiry to see if we can get you use the Welcome Home Loan Scheme.