Home loan rates are falling sharply as lenders follow the lead set by the Reserve Bank’s reductions in the official cash rate. But cheap does not necessarily mean easy.
Anecdotal evidence from the market suggests funds are still not flowing freely despite the steps taken internationally to end the crisis in credit markets. This is a market with a long way to go before it returns to anything like the conditions of recent years, if indeed it ever does and New Zealand is no exception.
Andrew L'Almont, chief executive Mortgage Express says that, if anything it is becoming more difficult to get loans approved with the major banks although some smaller lenders are looking at people who are prepared to pay a bit extra to get on the mortgage bandwagon.
Mortgage Express is part of the Harcourts real estate chain and L’Almont says there has been some more activity through open home sessions. But buyers and borrowers are tending to delay decisions because they assume that interest rates will fall further.
Neil Inns, director of the Professional Financial Group says: “I'm not seeing any loosening at all. In fact policies continue to be modified with regular policy updates tightening debt servicing and lending ratio criteria, rather than relaxing.
“My prediction is that there's more to come over the next six to 12 months as the banks get bitten by increasing bad debts and loan arrears.”
Brian Greer, Allied Kiwi chief, says funding remains the single biggest issue in the housing and mortgage markets closely followed by fears of unemployment.
Sue Tierney, of Mortgages by Design says banks are still being “very very” prudent. They are definitely still willing to lend but are looking at a variety of factors before making the decisions such as how much of the borrower’s own funds are being put in as a deposit, their occupations and whether they are existing clients.