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Get the latest news and tips about mortgage finance and the property market. Scott Miller, mortgage broker from Advanced Mortgage Solutions comments on housing and lending.

Mortgage Broker Christchurch - Lending Criteria

Published by Scott Miller on Thursday, June 07, 2012 in

                Lending Criteria


Over the last couple of weeks I have noticed a change in the appetite for lending over 80%.

Only 2 weeks ago lenders were offering substantial contributions to legal fees, waive Lenders Mortgage Insurance, and providing large discounts to clients placing as little as 10% or even 5% as a deposit on a property. What are the same lenders offering now for these types of loans………. almost nothing.

So what’s happened?

What I believe has happened (although I do not know for sure) is the lenders have been given the hard word from the Reserve Bank. My guess is they have been told to balance their over 80% Loan to Value Ratio loans with their under 80% Loan to Value Ratio loans.

In New Zealand when a loan has a Loan to Value Ratio of above 80% the lenders need to pay for Lenders Mortgage Insurance (every lender has their own name for this insurance, so you may be familiar with it under a different name). This is to insure themselves and not the person lending the money.

When the lender needs to secure funds from overseas they have to declare their level of loans with Lenders Mortgage Insurance (or mortgages that have a Loan to Value Ratio of higher than 80%). This is asked by the overseas lender so they can assess the New Zealand lenders level of higher risk loans and charge an appropriate interest rate for the funds required.

It is here that the Reserve Bank is applying pressure. With Europe in trouble, America’s spending coming back to haunt them, and China and Australia’s economies slowing the Reserve Bank wants New Zealand lenders to look in good shape if we head into another Global Financial Crisis (GFC). It was in the last GFC that showed the world how quickly funds for lending dried up.

So how does this affect you?

If you currently have a preapproval for a loan where your deposit is less than 20%, I STRONGLY recommend you purchase a property before the preapproval runs out of time. I say this because what is being offered in your existing preapproval will not be available if you need to reapply because you ran out of time.

If you are looking at purchasing a property with a deposit of less than 20% then contact your mortgage broker first as there are some products still available in the market.

This could be a flash in the pan, but something tells me it’s something a little more serious. At Advanced Mortgage Solutions we are always here to help so please feel free to contact us if you need assistance.

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