First home buyers’ withdrawal from market eases

After suddenly retreating from the housing market in the face of rising interest rates and tight credit availability, “the extent to which first home buyers are withdrawing has eased somewhat”, a new survey of mortgage advisors suggests.

The Government amended the Credit Contract and Consumer Finance Act (CCCFA) in December last year in a bid to protect Kiwis from irresponsible lending.

It required lenders to give greater scrutiny to borrowers’ finances to ensure they can repay loans, but led to complaints home loans were being rejected due to customers spending too much on the likes of Christmas shopping, takeaways, and streaming services.

That, along with mounting interest rates in the latter months of 2021, led first home buyers to take a step back from the property market.

However, a new report from economist Tony Alexander and mortgages.co.nz has found that while first home buyers continue to be cautious, “the extent to which first home buyers are withdrawing has eased somewhat”.

The results come from a monthly survey by Alexander of mortgage advisers across New Zealand. It found a net 20 percent of the 75 respondents reported they are seeing fewer first home buyers in the market. That’s compared to 65 percent in February.

“This is a sharp improvement from levels of the past three months and although still negative does bespeak of the stepping back in response to tight credit and rising interest rates perhaps having past its peak,” the report says.

Since concerns were raised with the possible unintended consequences of the CCCFA changes, the Government has announced several tweaks, including not requiring regular savings or investments to be inquired into when lenders assess borrowers’ expenses