How many home loan applications are turned down - and why?
Photo:
RNZ
Only a small number of people applying for home loans are being turned away - and usually there is a way to get them across the line in future, brokers and banks say.
Loan Market adviser Karen Tatterson said she would normally talk to clients before she set up a meeting to understand their financial situation and whether they were in a position to go ahead with a home loan application.
She said in 80-90 percent of cases, people were able to apply.
"If they are not then I would normally undertake some planning with them and set out a pathway to get them in that position."
That might include setting savings goals and a timeline to get to the point where they would qualify for a home loan.
"I would then agree to a check in in a nominated timeframe - say three months or six months depending on their circumstances and agree to touch base with them again for a review. I often do a periodic check in to see how they are going with their plan.
"Ironically most people I see or speak to are actually ready to buy. They are more often than not seeking an understanding of and support through the approval process."
There was $4.6 billion in new lending for property purchases in June across 7700 borrowers.
At Squirrel, chief executive David Cunningham said fewer than 5 percent of applications for a home loan were declined.
"An adviser has multiple options so that would likely be materially lower than for a bank. Also, low quality deals would be less likely to be submitted by a broker."
He said people were sometimes told to reduce or eliminate their personal debt and buy now pay later, and build their savings.
Westpac said when an application did not meet its criteria, the bank tried to work with the customer on ways to improve their chances of success in future.
"Therefore, while we can't give an exact number of customers who aren't approved for lending, the vast majority are ultimately approved. The most common reasons home loan applications may initially not be approved are that the customer does not have enough deposit, or doesn't meet our serviceability criteria to repay the loan."
BNZ general manager of home lending product James Leydon said the number of applications turned down was low.
"We understand how stressful buying a home can be and we want to make sure the experience is as smooth as possible. This includes letting customers know what
their likelihood of being able to secure a home loan is, prior to any paperwork or formal application process kicks off.
"Having an in-depth conversation upfront prior ensures our home loan partners not only understand the customers' situation at the time of enquiry but also enables them to make suggestions on how a customer can improve their financial situation and secure a pathway to home ownership."
Glen Mcleod, head of Link Advisory, said most people he met were eligible to apply, even if they first believed they were not.
"When we assess their situation, we explore a wide range of low-deposit purchase options, including support through Kāinga Ora's First Home Partner and the First Home Loan scheme. These initiatives are designed to help first-home buyers with smaller deposits enter the market.
"It's also possible to secure a loan of up to 90 percent of the property's value through several banks, especially when clients have a live deal in place and meet affordability criteria. Some lenders may consider 95 percent lending under specific conditions, though this is less common and subject to stricter assessment.
"For those just beginning their home ownership journey and who haven't yet saved a deposit, we work closely with them to build a plan. This includes strategies to grow their deposit, improve financial habits, and assess affordability. In these cases, it's rarely a 'no'-more often, it's a 'not yet'."
He said sometimes people could be approved with help from family.
"Ultimately, fewer than 5 percent of the people I speak with are unable to move forward. That means for the vast majority, there is a way-and we're here to help them find it."
Income
The income you need to be able to buy a house depends on your circumstances - banks look at things like whether you have kids, how many cars you're running and what other financial commitments you have. As a general indicator, a couple with a joint income of $150,000, two children and two cars might be able to borrow about $900,000.
You'd need income of about $102,000 in that scenario to borrow $500,000.
Deposit
You generally can get a loan with a deposit of 10 percent, although it helps if you have a deal already signed with a seller (with a finance condition). If you're a couple earning less than $150,000 a year, a First Home Loan could be an option - this can mean you only need a 5 percent deposit.
Debt
Cunningham said it was common to see people with $20,000, $30,000 or $40,000 of debt.
But he said it was a problem when the required repayments reduced the amount of income people had available to service the loan.
People were often advised to focus hard on paying off debt before they submitted their application. "It might be that you have a flasher can than you need so you might think about trading down."
He said a $5000 credit card debt might not be an issue but when there were three or four loans, it could become a problem. "The big thing is what is the repayment
That's a deduction from their income."
Buy now pay later could be a headache, too, he said. "For people looking to buy a house, it's not a good idea to use."
Decent credit
Cunningham said banks would also want to see a good credit history.
If the applicant had defaulted on a debt or was frequently behind on their bills, it mighrt make it harder to get approval. It helped if there was a good explanation for why it had happened, he said.
As part of the process, the lender or borrower would run a credit check that was "very comprehensive", he said.
"Make sure you're taking care of all your bills and if there's something missed, make it up as soon as possible."
Sign up for Ngā Pitopito Kōrero
,
a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
RNZ News
39 minutes ago
- RNZ News
More people making losses when selling their homes
The number of people losing money on home sales is at the level since 2014. Photo: RNZ / REECE BAKER The number of people making losses when they sell their homes is at the highest level since 2014, property data firm Cotality says, and Auckland sellers are being hit particularly hard. In three months, there was $128,362,612 lost by sellers. Cotality has released its latest Pain and Gain report, which shows the proportion of sellers making a loss or a gain on sales across the country. In the second quarter of this year, 89.4 percent of sellers made a gross profit - 10.6 percent made a loss. This does not include the cost of the sale, such as real estate commission. But in Auckland, the number losing money increased to 15.9 percent. In Tauranga, it was 13.2 percent and Wellington 11.9 percent. Christchurch had the smallest proportion of loss-making sales, at 4.9 percent. Cotality chief property economist Kelvin Davidson said it reflected how much prices had fallen in Auckland, and the higher number of apartments, which were more likely to lose money. The median profit among those who sold for a gain was $279,000. That is well down on the $440,000 median gain recorded during the 2021 peak, but higher than anything recorded before the end of 2020. The median loss was $52,500. Combined, the total gain made by sellers in the quarter was $4.9 billion. Cotality chief property economist Kelvin Davidson. Photo: SUPPLIED Davidson said the length of time that someone had owned a property played a big part in whether they made a gain or a loss. "Almost 50 percent of the loss-making resales in the three months to June had been held for less than three-and-a-half years." Those who made a gain had held their properties for 9.4 years. Davidson said that was the longest hold period for a gain since the mid-1990s. He said the weakness in property values could be encouraging some owners to hold for longer to allow gains to accumulate. "In other cases it may just reflect the fact that in a quiet market a lot of sellers simply have to wait longer for a deal to be achieved. "Indeed, some property owners may also just be choosing to hold for a bit longer if they're uncertain about their job prospects or don't want to pay transactions costs such as an estate agent's commission or conveyancing fees as regularly. In addition, lending restraints such as the loan to value ratio rules may have kept more people where they are for longer." He said investors could sometimes choose when to make a move but owner-occupiers were often driven by life events. It was not always a bad thing to move in a soft market, he said. "You might get less than what you might like for your own house but you may well get a bargain on the next one. "You might come out better off." He said there were hints that some sellers were choosing to take their properties off the market rather than accept a disappointing price. Wellington real estate salesperson Mike Robbers said he was seeing that. He said separating couples would sometimes put a house on the market, and then when offers came in lower than they wanted, one person would buy the other out instead . Standalone houses were less likely to sell for a loss. Almost 34 percent of apartments sold for less than they were bought for. Investors' experience was very similar to that of owner-occupiers, at 10.7 percent of sales making a loss compared to 10.1 percent for owner-occupiers. Investors had slightly larger gains when they made a profit and slightly bigger losses. In Auckland, 17 percent of investors were making a loss. Gareth Kiernan, chief forecaster at Infometrics, said the current downturn was so far shorter than one recorded from 1998 to 2001 and from 2008 to 2012. But he said there were signs that people who bought in the peak might have to hold on longer than in previous downturns to get back to neutral. "It's worth noting that house prices are currently still sitting about 13 percent below their 2021 peak. At the same stage of the cycle, 13 quarters after the December 1997 and December 2007 peaks, house prices were only 2.0 percent and 5.5 percent below those respective peaks. In other words, although the 1998-2001 and 2008-2012 loss-making periods were getting close to ending by this stage of the cycle, this time around we're still a long time away from everyone not facing a loss when selling property. Our current house price forecasts could see people in 2030 who bought at the peak of the market in 2021 still be making a loss if trying to sell. In the context of the NZ housing market experience of the last 75 years, that would be an incredibly long time to still be making a loss." Davidson agreed the downturn was "fairly prolonged". "The current cycle is deeper - in the GFC prices only fell about 10 percent peak to trough. This time they were down closer to 17 or 18 percent, we're three-and-a-half years into the cycle and nowhere near the peak. This has been a deeper and more drawn out episode. In some ways we're only halfway through or even less. "It's taking longer to accumulate gains and I guess it's also taking longer to avoid losses." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
an hour ago
- RNZ News
Kiwisaver provider Simplicity to build 600 long-term rental houses in Queenstown
Simplicity Living directors (from left) Shane Brealey, Anna Brealey, Sam Stubbs, and Andrew Lance on site at an earlier development in Auckland. Photo: Supplied Kiwisaver provider Simplicity is to spend hundreds of million dollars on building up to 600 long-term rental houses in Queenstown. It has bought a six-hectare site on Ladies Mile for the build-to-rent development aimed at answering the need for affordable housing in the central Otago town. The head of Simplicity, Sam Stubbs, said the development stacked up financially and socially, and was the sort of investment that Kiwisaver funds should be looking at . "This is another example of the sort of thing our Kiwisaver scheme can help make possible. We think it's a good long-term investment for our members and helps provide warm, dry homes for Kiwi families, in a region that urgently needs them." He said it was the first development outside of Auckland for its housing arm, Simplicity Living. "We've been looking around the country, and Queenstown is the obvious place, which needs good long-term rental options for people who work in the town -- nurses, teachers and cops some of whom are now commuting from Cromwell now." Stubbs said Simplicity had looked at expanding into Wellington and Christchurch, but was not convinced at the moment. He said the capital had infrastructure risks such as earthquakes and water, while the commercial return in Christchurch did not not stack up because an oversupply of properties has lowered returns. Location of the planned Simplicity housing development in Queenstown. Photo: Supplied / Simplicity Living Queenstown mayor Glyn Lewers said the development was "much-needed". "The addition of up to 600 new Build-to-Rent homes will be a game changer for our community, offering secure long-term rentals. "It's a tangible step forward in delivering [part] of the Joint Housing Action Plan - working with developers to facilitate and deliver diverse housing options." The development site is located near Remarkables Park, close to planned schools, shops, and transport links. The homes would be built primarily using concrete, brick, and local schist, with high thermal and acoustic ratings, solar panels, rainwater harvesting and common use facilities. The Shotover Bridge is a 10-minute walk away, and Queenstown Airport is just a five-minute drive away. Simplicity is currently building just under 900 homes in various parts of Auckland. Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
an hour ago
- RNZ News
A boom in businesses going bust
Dragonboat restaurant opened in the 1990s, and is now going into liquidation, owing at least 1.4 million dollars to creditors. Photo: RNZ / Yiting Lin New Zealand is riding its highest wave of company liquidations in more than a decade, with thousands of businesses folding and countless livelihoods caught in the crossfire. Many more are holding on, but just. In the first half of this year alone, 1270 businesses have shut their doors - a 12 percent increase on this time year. It's now anticipated that the total number of liquidations for the year will surpass 2024's 10-year high, when 2500 companies folded. That was an increase of nearly 700 compared to 2023. The numbers have been soaring since the pandemic. Deloitte partner Rob Campbell, who specialises in business restructuring, turnaround and cost transformation, tells The Detail the country "is getting closer to the peak but there is still a bit to play out". "There is no sector that's immune, no business too big or too small to fail," he said. "And [the debt] can be as simple as a few thousand dollars through to several million dollars." Newsroom business reporter Alice Peacock told The Detail that construction and hospitality are the worst-affected industries. "Small businesses have been hit harder from what I have seen in liquidation lists ... I think that's because for that size of company, it's harder for them to recover those costs and move on financially. "Probably what we are seeing hit the headlines doesn't fully represent what's actually happening. "Hospitality businesses ... are consumer-facing, they are the company names that people know, so they're more likely to be reported on than the smaller, local, maybe family-run scaffolding companies or your local roofer." One of those hospitality businesses is Auckland's Dragonboat Restaurant, which announced this week that it is going into liquidation. Opened in the 1990s, it now owes at least 1.4 million dollars to creditors. And it's these sorts of debts that can leave suppliers and subcontractors chasing unpaid invoices, triggering further closures, Campbell said. And this domino effect can be devastating. "It also has flow-on impacts to affected suppliers; they're out of pocket, that impacts their own business," he said. "They might be going through a period of stress as well, and the last thing they need is to, one, lose a customer and also have that customer not pay them as well. "So it can have a bit of a spiral effect." The cost of living crisis, rising unemployment, high interest rates, and a lingering Covid-19 impact are behind the increase in businesses folding. "Some of this feels like it was playing out two or three years ago, and there is a real lag effect from when stress is first experienced by a business to when it may become ultimately insolvent," Campbell said. But he and Peacock believe there is hope on the horizon. "Businesses are closing down, but businesses are also opening up," Peacock said. "I was at a hospitality conference a couple of months back in Wellington, and there were some really amazing stories to come out of that. "No-one was trying to pretend that it hadn't been a tough few years but there was one lead speaker who mentioned the number of liquidations but then was also trying to debunk a perception about the industry that it was all doom and gloom... and pointed to numbers that show... company incorporations, so those cafe and restaurant businesses that are opening, have also risen. "I don't think anyone would say the economy is clearly in a recovery phase yet. But there definitely do seem to be signs that things are improving... people have been speaking of better times on the horizon." Check out how to listen to and follow The Detail here . You can also stay up-to-date by liking us on Facebook or following us on Twitter .
