It has been a busy May when it comes to changes in the property and mortgage space. Here is a quick summary of the key developments.
Kainga Ora First Home Grant discontinued
Earlier first home buyers were eligible to get a Grant to help with the deposit. It was up to $10,000 per individual for a new home and up to $5,000 for an existing home. This has been discontinued. If you have a pre-approval then you have 6 months to use it.
However, note that the scheme where you can get loan approved with as low as 5% deposit (Kainga Ora First Home Loan) is still available.
Debt to Income Ratios (DTI) become a reality
It had been talked about for a while but it is now a reality. Please see below for details around it.
No change to OCR
RBNZ maintained the rate at 5.5%. Prior to the announcement, a number of borrowers were fixing their rates for 6 months in anticipation of a drop in OCR. RBNZ set an expectation that, OCR drop is not on the cards for 2024. Now most borrowers are opting for 12 months or 18 months rate.
We believe end of year drop in OCR is still a possibility.
Bright-line test changes
Effective July 2nd, the Bright-line test period will be reduced from 10 years to 2 years. This change offers relief to property investors grappling with the rising cost of living and higher interest rates, as it provides an opportunity to sell their rentals. Expect to see increased stock levels in the market. Additionally, new investors now have a promising opportunity to purchase rentals with a significantly shorter 2-year holding requirement.
LVR restrictions easing
Currently for an 'existing' investment property, investors need 35% deposit. From 1st July this is changing to 30% deposit. From 1st July, banks too will have higher flexibility to lend funds to borrowers will low deposit. Note: No change to the LVR restrictions for investors planning to buy 'new build' properties. 20% deposit is needed for new investment properties.
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