Tightening up on lending

Mortgage-FormFrom Stuff.co.nz:

One in every two to three first-home buyers could be shut out of the housing market as the Reserve Bank forges ahead with controversial restrictions on home loans. Banking sources say the central bank will announce new rules within the week that will rein in riskier mortgage lending to 12 per cent of new loans.

The changes will dramatically reduce the amount of high loan-to-value (LVR) loans that the banks are writing, making it much harder to get a mortgage with a deposit of less than 20 per cent. In theory, the new regime could strip close to $2 billion out of the loan market in a year, equal to more than 4000 homes at average prices.

I say let’s ask ourselves the following questions:

  • Is it so bad if the lending criteria are tightened?
  • Have we become accustomed to purchasing property with skimpy deposits?
  • In this material age have we lost sight of “no pain, no gain”?
  • Is living with debt the accepted thing?

Call me old school, conservative or irrelevant but I fully support the reining in of “high risk/low equity” lending. What was wrong with the old days when a minimum deposit of 20% was required? And yes we worked, scraped and saved to get it but somehow we used to do it.

Yes, sure it is going to hurt by raising the bar of lending, but wherever a new level is set it will always be too high for some. Once established, the rules become the new accepted norm and form the baseline for what is acceptable. Look at what the no tolerance drink driving rules has done for our teens. It has brought back some good old black and white rules and I think the new lending criteria will do the same in the long run.

If you really want something bad enough, you will always find a way of getting it.

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About Peter Griffioen

Peter Griffioen - or simply Griff to those who know him - has an established reputation as a high-producing Harcourts Canterbury salesperson. With a focused approach to customer service you can rest assured that you are in good hands, whether it be a relaxed chat about the state of the market or an in-depth discussion regarding your next property transaction. The key advantage of engaging Team Griff’s services is their local knowledge and experience. Currently in this post-seismic era, it is vital to have true professionals working on your behalf, ensuring that you are guided through the process professionally and with a caring approach. The advent of the ‘as is, where is’ market means specialised expertise are required and Team Griff has taken it on themselves to both understand and explain the pros and cons of this now accepted sale/purchase option. For over 26 years the Griff brand has become synonymous with achieving results. Griff now prides himself with his five member team and takes much satisfaction from empowering them to both achieve and reach their own goals. A team with a proven track record placed with the highest ranking Harcourts Million Dollar Club members, exceeding the $275m level. Such accomplishments highlight the team’s exceptional marketing and negotiating skills. Team Griff are recognised as industry leaders for their online presence and regular blog posts of current and relevant real estate information. E-marketing and readily available property specific detailed info means Team Griff’s clients have the edge when it comes to selling their homes, not forgetting purchasers who benefit first hand. A simple Google search says it all – the Griff brand ranking with the most frequent. Griff’s life focus extends beyond business, with quality time and fun being high priorities, while mountain biking, boating and fishing provide that vital time out. His Christian faith is his anchor for daily living, and his community is important to him. For a team approach to optimize the result for your next property transaction, be sure to talk to this award winning team - synonymous with hard work and results! Griff and his trusted team welcome your enquiry today.

6 thoughts on “Tightening up on lending

  1. tom

    Just shot yourself in the foot. Start using some intel & do the readings. Cant believe you’re in the industry quite frankly! People will find a way around macro tools as in the past…

  2. Max

    Dude, with all your experience -you have it wrong, cash strapped Asian buyers are hiking up property prices, where do you you think Kiwis baby boomers are getting 20% deposit from?Stop foreign investors than we can come up with 20% deposit

  3. Peter Griffioen Post author

    Funny you say that, Max – as I have an upcoming blog post on the proposals to ban foreign buyers of residential property. Watch this space…

  4. Peter Griffioen Post author

    To be frank, I think that imposing LVR restrictions is a way of safeguarding against destabilisation of the financial sector. In this current housing boom, it’s very tempting for people to take out such low-deposit loans. But the risk is that when the bubble bursts, we could see a considerable number of people being left with virtually no equity in their homes. This policy of the Reserve Bank is an attempt to deflate the bubble that is developing in the housing market without dramatically raising interest rates which would put pressure on the exchange rate, and in turn adversely affect our exporters. Whether it’s the best policy, that remains to be seen – but it is an effective, direct way of curbing the demand for housing.

  5. Peter Griffioen Post author

    Cheers for the constructive feedback, Tom. I try my best not to be a one-eyed real estate agent whose sole concern is their own bottom line. Having been in the industry for some time now, I’ve been able to list and sell properties in various different markets, and I don’t think the introduction of LVR restrictions will have a terribly big impact on that.

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