Survey suggests banks are cherry-picking first home buyers

First home buyers are dipping their toes back into the housing market as prices slow but they’re facing harsh scrutiny from banks.

A recent survey by mortgages.co.nz & Tony Alexander Mortgage Advisers found more first home buyers are expressing interest in buying.

The survey, which was carried out last week and included 68 mortgage advisers as respondents, found for the first time since August 2021 more mortgage advisers are reporting increased enquiries from first home buyers than are reporting decreases.

In fact, at a net positive 8 percent, the result is the strongest since February 2021 right before Loan to Value Ratio (LVR) lending restrictions were reintroduced by the Reserve Bank of New Zealand.

The survey found while first-home buyers are concerned about increasing interest rates and falling house prices, this appears to be overshadowed by the desire to have their own home.

“[While] buyers are concerned about high-interest rates, access to finance and prices falling after buying, it appears first home buyers may be focussing on the thing most important to them. That is securing a house to live in and raise a family rather than trying to get the last 5 percent or so of price declines in the housing market,” the survey noted.

But despite increased interest in purchasing, first-home buyers are still facing tough challenges to access home loans.

The advisors told mortgages.co.nz while a “trickle” of buyers can access less than 20 percent loans, banks are “cherry picking the highest income earners”.

They said 20 percent deposits, clean credit history and the ability to service their mortgages as interest rates rise are the biggest issues would-be-buyers are facing.

But it’s not just first home buyers who are looking at their options. The survey also revealed while fewer investors are in the market, they are starting to consider the implications of a possible change in Government next year.

“A net 33 percent of mortgage advisers this month have reported that they are seeing fewer investors coming forward for mortgage advice,” the survey revealed.

“The result strongly suggests a lack of investors in the market. However, the result is the least weak since July last year and is moving in the same direction as that above for first home buyers.

“It is likely that some investors are starting to think about the implications of National winning next year’s general election and restoring the ability of investors to deduct interest expenses from gross income. Borrowing costs have also eased slightly and prices have fallen 10 percent – 15 percent in many parts of the country.”

It comes after the latest data from Trade Me showed a whopping $100,000 has been trimmed off Auckland property prices since March.

The data showed the average asking prices for properties across the country have dropped by six percent, or $61,000, since March.