The main banks are out with temporary mortgage relief packages in line with the 6 month “holiday” announced by the Government last week. This program is a JV between the RBNZ, retail Banks and the Government.
Options include taking interest only for 12 months ie: paying only the interest cost with no payments to reduce the amount of the loan.
Or a loan repayment deferral which involves no repayments at all for 6 months.
Make no mistake, this is no “Mortgage Holiday”.
Your loan amount will increase while your repayments are paused.
And the Lender will still charge interest on what you owe on your loan. This interest is added to your loan amount and they charge interest on that amount as normal.
Facilities are being put in place to temporarily assist customers facing cash flow issues.
Waiver of home loan application, top-up, and re-documentation fees (Early Repayment Adjustment fees still apply).
- Interest only repayments on home loans for up to 3 months.
- Home loan holiday for up to 3 months (interest will still be added to the loan).
- Ability to extend home loan term for up to 3 months.
This 2 bedroom brick and tile unit in St Mary’s Bay sold today @ $1,020,000.
An end unit In a block of 4 its approximately 59 sqm internally.
Barfoot and Thompsons December sales figures are out confirming anecdotal evidence of a slow down. December 2015 sales were 796 down from December 2014 sales of 1050. A 24% fall. Some of the froth is coming out of the Auckland market.
Data out from Harcourts today shows a fall in Northern region sales of 14% when comparing November 2014 with November 2015.
Total new listing were down 17% and new auction / tender listings were down 26%.
The government has introduced a capital gains tax on residential property holdings for buy and sells within 2 years. Exemptions mean owner occupied housing is unlikely to be affected but the eye opener is that all non resident tax payers will now have to register with IRD and open an NZ bank account. Non resident purchasing of property here just became distinctly less attractive i’d imagine.
The odds of a OCR reduction next month have shortened considerably as result of the 2 big recent property announcements.
ANZ Bank has cut fixed interest rates today. 1,2 and 3 years fixed now @ 5.59%.
The policy changes, proposed to take effect from 1 October, will:
- Require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30 percent.
- Increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15 percent, to reflect the more subdued housing market conditions outside of Auckland.
- Retain the existing 10 percent speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80 percent.
The changes also come with an expectation that Banks are to hold more capital against loans in the category of residential property investors.
At street level this may mean fee’s and / or an interest rate margin being applied to property investor lending.
We shall wait and see. A summary of a consultation process will be released at the end of the month.
The Reserve Bank, in looking to have some control over the Auckland property market without using interest rates, is consulting with market participants on a definition of “Property Investor”.
Its providing 3 options for comment on.
- if the mortgaged property is not owner-occupied; or
- if servicing of the mortgage loan is primarily reliant on rental income; or
- if servicing of the mortgage loan is at all reliant on rental income.
By requiring the Banks to section off all loans in this yet to be defined category, it will be able to target specific action, rather than raising or lowering the cash rate which affects all borrowers to some extent.
Bottom line: The ground work is being laid for higher interest rates and / or an Application Fee to apply to property investment loans.
Barfoot and Thompson sold $8,574,015,963 worth of Residential Property in the 12 months to June 2014.
This was up some $700M on the 12 months to June 2013.
Interestingly this increase in $ amount was on 15 less sales for the same period.
The Loan to Value restrictions introduced in October last year seem to have at least partly met the Reserve Banks goal of ensuring financial stability in the event of a sharp correction in house prices. Perhaps at the lower end of the market anyway.
The restrictions have hit sales of cheaper homes the hardest, as highlighted by the RBNZ in a report today.
Sales of properties for less than $NZ400,000 fell 23 per cent between October and March. In addition, First-Home buyers share of the total home sales fell to 17 per cent in February from an average 20 per cent in the past two years, it said.
In relation to when the restrictions may be eased the comment was..“However, we will need to be confident that immigration pressures will not cause a resurgence of house price inflation. We consider that the earliest date for beginning to remove the LVR restrictions is likely to be late in the year.”
At the other end of the market it was interesting today to watch 3 bidders have a gentle tussle over a substantial luxury home of 4 bedrooms @ 1 Canterbury Place in Parnell. Knocked down eventually under the hammer @ $3,255,000.