PHOTO: Buying your first home isn’t easy – but it is possible.
Since the global financial crisis, no-deposit home loans have become a ghost story in New Zealand – and even low-deposit home loans are now tough to get.
In 2013, the Reserve Bank of New Zealand (RBNZ) placed limitations on the proportion of high loan-to-value ratio (LVR) loans any lender could provide. Though these have relaxed slightly over time, acquiring a mortgage remains a challenge for many hopeful first time home buyers.
Why can’t banks give zero-deposit loans?
LVR restrictions exist to protect New Zealand’s financial system against the risk of a housing market crash. They were originally introduced in response to rapid house price growth, alongside a sharp increase in low-deposit lending. This rapid price growth increases the risk and potential impact of a major correction in house prices, and consequential loss to lenders. With mortgage finance representing half of bank lending in New Zealand, according to RBNZ, such losses could have far-reaching implications for our economic system.
If housing prices were to fall this erodes a homeowner’s equity – most heavily impacting new home buyers who have entered the market with little equity at all.
READ MORE VIA REALESTATE.CO.NZ