Tight credit availability makes it harder for homebuyers to get loans – Mortgage Survey

Auckland, November 1, 2021. Those in the market to buy a new home may have a harder time getting approved for a mortgage, according to a latest mortgage survey.

Comments from an October survey of 60 mortgage professionals nationwide by Tony Alexander and Mortgages.co.nz show banks are still willing to lend money – but their assessment of the amount of money that can be borrowed becomes more difficult. This includes how they perceive income, expenses, monthly cash available and the amount of deposit. Independent economist Tony Alexander and Mortgages.co.nz are collaborating to conduct a monthly survey of mortgage advisers across the country. Here is a summary of the results reported in October 2021.

Strong points

  • New lending rules make it much harder for first-time home and low-equity borrowers
  • Investor interest continues to decline, but could be supported by growth in construction
  • Willingness to lend remains strong for standard mortgages
  • Three-year fixed interest rates are now by far the most popular

A slight drop in first-time home purchase requests this month

As Auckland continues to be subject to level 3 restrictions, the overall drop in first home buyer interest continues. However, it has almost leveled off with just 2% net of respondents seeing a further decline this month. The expected increase with the lifting of lockdowns will be more limited than last year with tighter lending rules, higher interest rates and a growing possibility of overseas travel.

Investor demands continue to decline

A net 39% of mortgage professionals received fewer inquiries this month than in August. While this is less pessimistic than the month before, the impact of the March 23 announcement clearly continues. Rising interest rates may well see this negative trend continue for some time, despite easing closures. However, the growth in construction and the decrease in development restrictions in our largest cities should keep investors in the market.

Refinancing requests continue to grow

A monthly increase in requests for refinancing
advice continues, albeit at a steadily declining pace since the sudden jump in June. This continued activity is likely due to rising interest rates. Refinancing activity can be even stronger as investors sell one or two properties to reduce debt or move to other assets.

Willingness to lend remains positive

Despite reports of tighter lending criteria for borrower finances, mortgage counselors report that there is still a willingness to provide mortgages. This is reassuring, given the changes underway to limit the growth in house prices, such as tax changes and increased supply.

The preference for a three-year fixed mortgage continues to grow

Seventy-seven percent of those polled said most people want a three-year fixed interest rate, up from 57% last month. This may be because recent inflation figures are higher than expected and the Reserve Bank raised the official treasury rate from 0.25% to 0.5%, which marked the start of ‘a longer-term orientation. There is still some interest in the two-year term, but the preference for the one-year term is now almost non-existent.

Regional observations

Here is a selection of general comments from mortgage professionals who responded to the monthly survey questions.


  • Whangarei market is still very active with regular sales in the $ 1M + category, despite 11 days of level 3 restrictions this month
  • It’s tough for first-time buyers, but opportunities still exist


  • There has been an increase in the number of Aucklanders willing to buy from outside the region
  • More first-time homebuyers’ inquiries sparked by their owner’s sale
  • A lot of recent policy changes have created differences between banks that buyers are unaware of, so they tend to give up after being turned down by a lender.
  • The less than ideal hardship application process is the only option for financially troubled borrowers now that interest only and mortgage leave are no longer available
  • The fear of missing out is still strong, but more and more it is replaced by “can I afford the payments?” “
  • Construction financing requirements are more stringent as banks try to minimize the time between approval and completion and are wary of construction costs
  • Changes to the Credit Contracts and Consumer Credit Act (CCCFA) impact sound credit decisions, delaying credit approval times and creating inconsistent decisions
  • At least one main bank withdraws mortgage supplements for the financing of deposits for non-bank real estate mortgages
  • Many buyers say open houses at level 3 are a nightmare, so they will wait for level 2

Bay of Abondance

  • The market is still very busy and prices continue to climb
  • There is a very limited supply of sections
  • CCCFA changes make lenders very cautious, eliminating first-time buyers and making homeowners reluctant to sell as buying will be more difficult
  • The CCCFA changes mean that buyers must show that a mortgage is affordable while maintaining the existing standard of living, so Kiwi’s traditional approach of “paying the mortgage and adjusting to survive on the rest ”has disappeared
  • A lender applies a debt-to-income calculation on every request


  • No bank offers high LVR loans to new customers, only existing customers
  • One Year Fixed Rate Borrowers Break And Fix For Three

Hawke’s Bay

  • CCCFA changes cause delays in standard approvals due to the amount of information now required
  • More emphasis is placed on applicants’ monthly expenses and their ability to repay a loan


  • Monthly expenses are reviewed in detail and discretionary expenses are counted as normal expenses
  • Lenders follow the new CCCFA policy to the letter and do not view the big picture with common sense
  • Some self-employed with no debt and with a healthy deposit now see their commercial debt, including Covid-19 assistance and company vehicle debt, treated as personal debt, so they are no longer able get a home loan.
  • Pre-approvals are reassessed under new rules and there is a looming issue of expired approvals no longer meeting new debt service requirements, especially with construction loans
  • Life is tough for buyers with a continuing shortage of homes for sale and a chance that pre-approved loans will be re-evaluated and reduced unless buyers can move in in the near future.
  • More and more people are looking for financing to renovate or add smaller freestanding units to their properties without subdividing
  • Some banks now want a recorded valuation on almost all new mortgage transactions, regardless of loan-to-value ratios, which can help them cope with new capital requirements ahead.

Nelson / Tasman

  • Low deposit pre-approved first-time homebuyers struggle to find a suitable home similar to the beautiful home they’re renting, and they’re not always willing to compromise.
  • Some couples move to Christchurch where houses are more affordable


  • It is almost impossible to get a low equity loan unless the buyers meet the Kāinga Ora criteria
  • Lenders seem to have little appetite for less than 20% deposit loans for existing properties
  • Short-term consumer debt, like Afterpay and Laybuy, should be closed for first-time buyers or low deposit loans
  • First Home Grant price caps almost never work in today’s market
  • One of the most significant changes, a 150% increase in uncommitted monthly income required after all regular expenses (UMI), mainly affects first-time buyers and appears to be due to the restriction on lending by the Reserve Bank to people with less than 20% deposit.
  • Home prices are so high that it is difficult for first-time homebuyers to buy without the help of their parents, as very few of them qualify for the First-Time Home Grant.
  • People who previously got loan approval and are engaged in new home construction are now worried that they will no longer meet service requirements when it comes to paying for their purchase.


  • It is now much more difficult for first-time buyers to get a loan with a down payment of less than 20%
  • Approval time is always a big issue, with lenders taking 10 or more business days; if they email a question it adds three extra days

To learn more

Visit mortgages.co.nz
to read or download the free full investigation report including graphics.

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