Latest news with #LoanMarket
NZ Herald
21-05-2025
- Business
- NZ Herald
First-home buyers are getting into market with less savings, data shows
That's a significant increase from March 2023, when there was just $510m in lending to borrowers with less than 20%, and last March, when there was $584m. 'First-home buyers basically have the monopoly on low-deposit lending allowances at banks,' CoreLogic property economist Kelvin Davidson said. 'Owner-occupiers further up the ladder may not need low-deposit finance as much so that's part of it, but I also think to some extent that the banks have been sort of reserving those speed limits for first-time buyers. 'For quite a while now we've seen about 75% or 80% of all low-deposit lending to owner-occupiers in general has been to first-home buyers. 'About two in every five first-home buyers, or even a bit more than that, are entering with a low deposit.' He said some buyers might not even be aware it was an option. 'Some people might be out there thinking 'gee I don't have the required 20% so I can't buy a house', but actually there are allowances there and a lot of it goes to first-home buyers. 'I think if you want to get into the market with a reduced deposit there probably is capacity - the speed limits overall aren't really being tested. 'The speed limit there is 20% [of new lending] but only about 12% is going out at low deposit … then other tests come into it.' He said KiwiSaver was also helping. In April, 3970 people withdrew their KiwiSaver funds for a first-home purchase, up from 3320 in April 2024, with a total of $167.3m withdrawn. Mortgage adviser Glen McLeod, head of Link Advisory, said borrowers with less than a 20% deposit were able to access interest rates from about 4.99% to 5.59%. 'Those who qualify for a Kāinga Ora First Home Loan can access these same rates with as little as a 5% deposit, though a 0.50% fee applies. Advertise with NZME. 'When the deposit is under 20%, most lenders apply a low equity margin, which is typically tiered based on the loan-to-value ratio. 'These margins vary by lender, but we're starting to see some shift in the market – one major bank has recently removed these margins altogether, offering a standard rate and a discounted rate for borrowers with more than 20% equity.' He said it was noticeable that more applications were including income from boarders. 'Whether it's friends helping with mortgage payments or adult children moving back home, many buyers are looking for ways to improve affordability. 'In some cases, income from secondary dwellings or granny flats is also factored in, where accepted. It's a reflection of how people are adapting to meet lending criteria in a challenging environment.' Adviser with Loan Market Karen Tatterson said a first-home buyer with ASB who had a 10% deposit would pay the advertised interest rate plus a 0.75 low-equity margin. 'As an example, their one-year rate would be 5.7%. 'ANZ, who do not charge a low-equity margin, apply their standard rate so for first-home buyer at 90%, their one-year rate would be 5.59%.' She said all the banks were also offering a $5000 cash contribution for a first-home buyer. Overall, Davidson said the market continued to steadily become more active. Sales were up 4% compared to a year earlier in April, taking activity to 7% above the historical normal for this time of year. 'Sales activity has been on a steady incline, and we're now starting to see this translate into home values,' Davidson said. The Cotality Home Value Index rose 0.3% in April – the fourth consecutive monthly increase – although growth remains modest. Among the main centres, Hamilton and Christchurch led the gains, while Dunedin, Wellington and Tauranga showed flatter results. 'Despite these signs of improvement, the market remains tilted in favour of buyers,' Davidson noted. He said the outlook for the rest of the year was for moderately increasing prices and activity. 'We're expecting a moderate upswing, with national property values forecast to rise around 5% for the year,' he said. 'Lower mortgage rates will be a key driver. But we're also watching the wider economy, the labour market, and the impact of lending restrictions, particularly debt-to-income limits.'
News.com.au
19-05-2025
- Business
- News.com.au
Refinancing at the right time can save big
ANALYSIS This week it is widely anticipated we will see a cash rate cut, which would mean a decrease in interest rates in the weeks following, putting more money in the pockets of homeowners. We saw the first cash rate cut in over four years in February, and following that, Loan Market data shows a 63 per cent increase in refinancing activity. Homeowners have been paying some of the highest interest rates we have seen in a decade and they are ready to move to a better deal. If there is another cut on Tuesday, we expect to see a lot of movement as people look to other lenders. Here is why. Let's look at an example of how much a homeowner could save. If the RBA cuts the cash rate by another 25 basis points, the total reduction since February would be 50 basis points. Say you had a $750,000 home loan on a 30-year term with a fortnightly repayment and your interest rate at the start of the year was 6 per cent p.a. – a 50 basis point cut would move it to 5.50 per cent p.a. That could save over $3500 in interest in the first year alone. But here's the insight: not all lenders will pass on that cut in full. While most passed on the February drop, history shows many banks hesitate when it comes to lowering rates. And when the cuts do come, they can be partial or delayed. Some also offer better interest rates to new customers than existing ones. This means not shopping around can lead to paying a loyalty tax. Let's say you refinance and lock in a full 1 per cent reduction. That simple move from 6.5 per cent p.a. to 5.5 per cent p.a. on a $750,000 mortgage could save over $170,000 over the life of the loan. That's a big enough saving to make homeowners sit up and take notice. If you don't compare your loan regularly, chances are you're paying more than you need to. Knowledge is power, enabling you to negotiate your rate with your current lender, or switch to a better deal if they don't come to the table. Staggering reason Aussies won't get a rate cut The other trend we are seeing is over three in four home loans are prepared by mortgage brokers. This is because there are hundreds of lenders in Australia and thousands of loan products. Brokers can run the comparison on your behalf and let you know if refinancing is right for you and how much you could save if you switch. If you're ready to take control, here are five simple steps that can help you make the most of lower interest rates: Keep your repayments the same Even if your lender reduces your minimum repayments, if you can, stick to the higher amount. You'll pay off your loan faster and save big on interest. Compare and renegotiate your rate Understand what rates are available and talk to your lender. It never hurts to ask for a lower rate, and if they won't offer a competitive deal, it could pay off to switch. Use your offset account wisely Extra savings in an offset account reduce the interest on your loan without locking up your money. They're a quiet achiever in your financial toolkit. Make extra repayments If you receive additional money, such as from a bonus or tax return, consider putting it toward your home loan. This could help you save on interest and pay off the loan sooner. Talk to a mortgage broker A broker can look at a holistic picture of your situation to determine if the structure of your loan is right for you. If you're not using all the features in your loan, the switch to a more basic loan could potentially save you money. David McQueen is the CEO of Loan Market.
