The New Zealand Herald has reported a rise in the number of people rushing to get pre-approval for home loans with less than 20 per cent deposit before changes to mortgage loans come into effect on October 1.
Under the changes, recently announces by the Reserve Bank of New Zealand, only one in every 10 new home loans will be allowed to exceed 80 per cent of the property’s value, meaning most borrowers will have to fork out a 20 per cent deposit to qualify for a mortgage. The quota will be calculated on the dollar value of the loans.
The changes are the result of concerns by the Reserve Bank about the rapid rise of house prices, and the potential risks that poses to the economy.
According to the New Zealand Herald, the country’s dollar is already high by historic measures and any increase in interest rates would likely force it higher, leaving the Reserve Bank with little option but to enforce these new restrictions.
Reserve Bank Governor Graeme Wheeler said: “Housing plays a critical role in our economy. It represents almost three quarters of household assets, and mortgage credit accounts for over half of banking system lending. Housing is a major source of value and of risk to the household sector and the banking system.”
Mr Wheeler said the Reserve Bank is not alone in expressing their concerns about the economy.
“Over the past several months the IMF, OECD, and the three major international rating agencies have pointed to the economic and financial stability risks associated with New Zealand’s inflated housing market,” he added.
According to Mr Wheeler, how long the restrictions will remain in place depends on the effectiveness of the measures in restraining the growth in housing lending and house price inflation.
Since the announcement, the New Zealand Herald has reported that four of the five major banks have been inundated with enquiries from customers about the restrictions and how it will impact them.
For New Zealanders who do obtain a mortgage before October 1 with a 10 per cent deposit, Grace Removals is here to help with their relocation. At Grace we pride ourselves on knowing and understanding our customer’s needs. We appreciate that applying for a loan, purchasing a house and moving is a stressful experience and therefore offer a range of services and solutions that take the pressure out of moving. Give us a call and see how we can help you.