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Lending

Westpac have entered the Welcome Home Loan (WHL) market, the first of the majors to do so. As we come out of recession and the Banks gain more confidence in the property sector others should follow. Housing New Zealand have the final say with any WHL, so it doesn’t matter which Bank provides the funds, have a look at www.welcomehomeloan.co.nz for details. They are strict!

GE and Wizard have been bought by Pepper Home Loans out of Australia. There is talk of Pepper opening here but nothing confirmed. I’ve had several people contact me regarding refinancing for a better rate. Can be done and depends on circumstances.

NZF Home Loans have been sold to Resimac, Australian again. The sale is completed and we expect new products later in the year. This with Liberty and a couple of others is beginning to open up lending again, again showing confidence in the New Zealand property market.

Liberty have re-launched their Lo Doc product with lower rates and lower fees. Minimum trading period is 12 months, no penalty for overpaying and rates from 7.05%. This s the only true Lo Doc mortgage product currently in New Zealand and is selling well.

Liberty also have a 90% loan at 5.75% which can be used as a standalone Investment property mortgage. Most other Banks limit this to 70 or 75%.

All high LVR products (with the exception of the Welcome Home Loan) require at least 5% of the deposit to be saved and any debt (GE Cards etc) must not exceed the level of deposit. This is a requirement of the Mortgage Insurer so even if the local branch says OK, it probably won’t be. Gifted deposits are OK but there are rules, it pays to find out first.

Larger Finance Company loans are on rise. This is party because in some cases more than one can lend on the same property and create a joint first mortgage. Very useful for development deals or large semi commercial deals where servicing can be difficult to prove. Rates are in line with the risk, so expect around 10% and 2.5 to 3% in fees. Can also be used for refinancing in the short term to clear up arrears before returning to the Bank in six months with a clear record.

The Market

Overall we are seeing a bright start to the year with enquires well up and loan approvals increasing. There is a general air of optimism and first home buyers are very active this month. The OCR according to BNZ last week, will remain the same for the rest of the year, before coming under pressure to rise. I agree with this and so it seems do most of the Banks as fixed rate money is out of fashion and so to attract more business I’ve seen two year fixed rates as low as 5.49%. Compare that to the rates a couple of years ago! The Banks are also easing a bit so those unable to borrow last year are finding it easier now. All helps the bottom of the market, which of course flows through the whole market over time.

Prices

Prices are undoubtedly firming and in most City areas on the rise. There is simply little supply and a stronger demand, particularly at the lower end. Rural prices are softer and Lifestyle blocks continue to be burdened by oversupply. Perhaps the trickiest market is Apartments and Townhouses as Banks are limiting their loans on these to around 70%.

Debt Management

This is still an area of concern for Banks and the Government alike. Too many people have too much debt and I’m often asked if say $25,000 worth of debt can be rolled into a mortgage taking the LVR over 100%. The answer is no it can’t! So general advice is get rid of the debt and save before asking the Bank for a mortgage. Another area of concern is large debt and small deposit. All Banks, when lending at 90% plus, require at least 5% of the deposit to be saved (except Welcome Home Loan). This can be Kiwisaver or Savings but not a gift or sale of a car.

and Arrears

So far this month I’ve either stopped the mortgagee process or re-financed 5 people in trouble. Only one had made any contact with their Bank, the others had been hoping it would all come right. It doesn’t come right unless people act quickly and once the formal process of repossession starts it’s almost too late as funders don’t like taking on a debt from someone who has clearly not responded to their current situation. I am always around to talk people through (just spoke with someone as I write this) and provide quality advice as to what to do.

Regulation

This has been with us since July last year and little has changed. There is no legal requirement for formal qualifications in either the mortgage or risk insurance space, I find this amazing. All that is required is for a person to be registered as an RFA and if selling insurance, have PI cover in place. We are fully qualified and would urge anyone dealing with a Broker or Adviser to make sure they are dealing with qualified person, after all a mortgage is probably the most important financial decision you will ever make.

Success Rates

As we qualify each mortgage in-house to decide which Bank or Lender will provide the best solution, our success rate in 2011 was a little over 90%. Many of our Lending partners comment on the quality of our submissions, why settle for anything less.

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