NZ Mortgages managing director and head of lending Nathan Miglani says mortgage writing is up substantially after dipping 25% over the past 18 months.
Last financial year, the business wrote more than 700 mortgages – about 60 a month. From its 2020 peak, business fell 25%, but it has risen steadily in the past few weeks, back up to 40-50 mortgage applications every month.
Maglani puts it down to the loosening of LVR restrictions about six weeks ago. During the downturn, NZ Mortgages did many top-up mortgage applications for clients on banks offerings of 1% loans for EVs, solar and insulation. “That was reasonable and kept us going but home mortgage applications have ramped up quickly again recently.”
First home buyers and investors are leading, rushing to secure property while prices are low and before October’s general election. “Many buyers believe if National is leading the country after the election, house prices will start rising the day after.”
He says auctions are being brought forward and many properties, particularly in Christchurch, have multiple offers.
“When LVRs loosened, banks reacted swiftly and opened their mortgage books more for first time buyers with less than a 20% deposit. In reality, 90% of first time buyers don't have a 20% deposit – maybe 10% or 15%,” Miglani says.
First home buyers came on to the market quickly and investors also showed interest after 18 months of fence-sitting.
Miglani says, about 50-55% of its mortgage applications are first time buyers, so banks opening their books more is helping them get their foot through the door.
The average interest rate is 6.89% to 6.99%. Non-bank lender rates are 8-10% and Miglani says not many applications are going to second-tier lenders. “Their interest rates are just not affordable for anyone to service anymore.”
His company is encouraging people on its database and others, with secure jobs, to buy sooner than later as property prices have fallen substantially since the November 2021 peak.
The sweet spot for Christchurch first home buyers is about $700,000. “Any property that's under that price is selling extremely well.” One of Maglani’s clients just bought a four-bedroom, two-bathroom, double garage, 180m2 house on a 500m2 site for $700,00. Four clients also bought properties at auction yesterday. Every property had multiple bids.
However, properties are taking longer to sell because vendor expectations are still high. Some sales have been small rental properties the owners can’t afford to keep because of higher interest rates and tax deductibility being phased out.
Despite this, NZ Mortgages has a marked increase in property investment mortgage applications underway. “A few of our clients have already settled and there are plenty more coming,” Maglani says. “I see this as a trend for the rest of the year.”
The parts of the market struggling are off-the-plan sales and buyers wanting to upgrade.
There are few listings for properties in the $900,000 - $1.5 million range and any that come to the market don’t stay for long, Maglani says. “A property in Ohoka, near Rangiora in North Canterbury, had 30 groups of viewers during its first open house. We have not seen that for a long time and similar properties are attracting the same attention.”
The off-the-plans market is dead, Maglani says. “No-one is buying townhouses off-the-plans – a previous investor favourite – because the numbers don’t stack up any longer.
“A townhouse worth $750,000 bought two years ago and rented for $550 a week, with a mortgage repayment of $1,000 a week doesn’t make sense. Nobody’s got a surplus $500 a week to service the mortgage repayments. Hence, that part of the investment property market has been dead these past 18 months and developers have pulled back.”
However, investors are buying again in other markets. “Smart investors know that when interest rates fall house prices will go up,”Maglani says. “Most are looking at new, already built, townhouses or apartments because tax deductibility is still available and the Brightline Test is only five years.”
The company operates across the country – Auckland, Wellington Christchurch and is the third biggest writer of mortgages in New Zealand. Maglani says the Wellington market is still slow and sluggish, Auckland central is on the way up, the North Shore is slow and Christchurch is humming. He says the company is lucky that 95% of its business is in Christchurch and the city hasn’t suffered the big downturn in house prices, the rest of the country has.
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