What are you seeing with the bank financing environment?

[Davo36]

What is the agency fee?
Do they subcontract part of their work ?

I don't know Beano. I assumed that was a LINZ fee or something. I'll ask.

[Learning]

4.19 2 years.

They’ve just offered me 4.25% for 2yr and 5.09% floating (Total money) on $760k.

[Davo36]

What is the agency fee?
Do they subcontract part of their work ?

This was their reply re the 'agency' bit:

Dear David,

Further to your email, our agency cost in this matter covers our time spent searching the various documents, the preparation of the various instruments required and registering each of these instruments with Land Information New Zealand.

Kind regards,

I'm none the wiser.

[Don't believe the Hype]

Seems to me like they're taking the piss with the agency fee... their staff costs should be in the quote they gave you. I understand reimbursement of actual costs/fees they incur but not additional labour charges.

[Davo36]

Yes I agree.

I asked if the rest of those amounts (e.g. LINZ Government registration... for $740) were LINZ fees and they said yes.

So yeah, they quote $750 + GST and disbursements and then charge extra for their time doing some of the other bits, which they call disbursements. I would have thought that disbursements would be the LINZ fees only, not their time as well.

However they've acted for me in another matter and the bill was really cheap, so I'm not going to rock the boat, will just bear it in mind for next time.

[Chris W]

Heard that ANZ in Australia will be regarding all interest only loans coming up for renewal as a credit critical event requiring full income verification effective 5 March 2018. Could have a similar effect in New Zealand.

[Beano]

Heard that ANZ in Australia will be regarding all interest only loans coming up for renewal as a credit critical event requiring full income verification effective 5 March 2018. Could have a similar effect in New Zealand.

Generally that is not a problem so long as it is not the first year of trading

[brokerman]

BNZ and ANZ sharp on rates for o/occ and good with cash incentives too!

[Davo36]

o/occ ?????

[Don't believe the Hype]

Owner occupied

[Davo36]

Westpac are terrible with giving you credit cards.

Taken weeks for one to arrive. Now they want all my income statements for the past 3 months to put a PIN on it and be able to use it! I provided all this when I shifted the mortgage over, but they say they can't get that from Westpac. Yes Westpac can't get info from Westpac.... pfffft.

[Chris W]

Out of Australia, yet given that the big 4 banks in NZ are Australian owned, this could have ramifications for lending to owner occupiers in NZ

Homebuyers' borrowing capacity could be cut by up to 40 per cent under tougher rules

Key points:

• Homebuyers' borrowing limits likely to be cut by up to 40 per cent due to higher expense benchmarks
• Current benchmarks used in 75pc of loans expect Sydney family of four to have expenses lower than income of aged pensioners
• Tighter credit rules likely to lead to falling house prices, according to UBS

Homebuyers could see their capacity to borrow cut by up to 40 per cent as a result of reforms likely to be driven by the banking royal commission.

Research from investment bank UBS found the expected tightening of lending standards and raising of living expense benchmarks would cut credit availability by 21 to 41 per cent, depending on the borrowers' incomes.
Currently, about three-quarters of all home loans are assessed against the "basic" Home Expenditure Measure (HEM) benchmark.
For a family of four, that is $32,400 a year, a level below the current old age pension for a couple.
UBS economist George Tharenou said while banks were already undertaking greater due diligence at the Australian Prudential Regulation Authority's (APRA) behest, the royal commission had established misconduct was more severe than many observers anticipated, and irresponsible lending was already a key finding of its investigations.


"In particular, APRA raised an alarm regarding the over reliance on the HEM benchmark," Mr Tharenou said.
"This benchmark assumes only a very modest or frugal level of household expenditure — it assumes that a family of four in Sydney has living expense slightly less than the income provided to a retired couple on the old age pension."
UBS said the "lavish" HEM benchmark of annual expenses at $58,200 was much closer to what the royal commission was likely to recommend regarding banks making "reasonable inquiries" about a customer's financial position.
"When we re-ran the major banks' home loan calculators using the higher-living expenses, we found the borrowing limit fell sharply, by 30 to 40 per cent in many cases," Mr Tharenou said.
Raising the HEM

$80,000	$50,000	$195,912	2.4x	-42pc
$100,000	$58,320	$327,000	3.3x	-32pc
$125,000	$68,320	$465,615	3.7x	-28pc
$150,000	$78,320	$538,622	3.6x	-34pc
$200,000	$88,320	$792,804	4.0x	-31pc
$500,000	$108,320	$2,472,763	4.9x	-21pc

Source: Major banks' borrowing calculators, HEM "lavish" lifestyle, UBS

Even using the "lavish" HEM for a family of four with a gross income of $100,000 a year, didn't mean a comfortable existence according to Mr Tharenou, but it was closer to reality than banks' current benchmarks.


The banks' relaxed view of household spending often allows homebuyers to borrow more than five or even six times their annual income.
The NAB recently cut its "hard cap" on loan-to-income ratio from eight times income to seven times income.
The higher benchmark would see loan-to-income ratios drop to a multiple of about three to four times, according to UBS numbers.
"This is consistent with lending limits that were considered conservative prior to the housing boom, and is consistent with lending limits generally available overseas," Mr Tharenou said.





Credit Crunch

UBS found the likely impact of tighter lending rules meant the banks' lending "super cycle" was over.
Even under UBS's more benign base-case scenario, mortgage funding for the big banks would fall from close to $300 billion over the past two years to $222 billion in 2019 and housing credit growth would flatline.
"In a more negative scenario, the banks may be required to undertake due diligence on customers' financial situation to comply with the 'reasonable inquiries' within the Responsible Lending Laws," the UBS research said.
That sharp reduction in borrowing capacity and credit would likely have a nasty impact on the broader economy.
"Further, the household wealth effect could reverse and many potential investment property buyers could avoid the market," UBS said.
The resulting credit crunch, where new funding falls by 25 per cent in 2019 and a further 10 per cent in 2020, "is not inconsistent with experience seen overseas during the GFC," the report found.

"Further, consumption and GDP would be likely to slow sharply and the RBA may consider cutting rates."

And as Mr Tharenou pointed out: "There is a strong correlation between home-lending volumes and house prices."
"If this correlation holds and housing finance falls as seen in our scenario analysis, this could lead to a substantial reduction in Australian house prices."




Source: http://www.abc.net.au/news/2018-04-0...r-cent/9621696

[Chris W]

Latest from mortgage brokers squirrel.co.nz and what they're seeing.

The importance of liquidity in the housing market


Back in 2013 I was buying a number of properties. Somewhere along the way I subscribed to a mortgagee sales newsletter. For a long time since that newsletter has been bare, until this week. I had to scroll through it this week for the first time in ages with fourteen properties. A quick look in Trademe shows there are 24 mortgagee sales currently listed in Auckland.


I’m not surprised that I’m starting to see more mortgagee sales. With lower liquidity in the second half of 2017, more punters are getting caught out. The numbers are still small so let’s not overplay it.


It’s a great reminder that cash flow is king. One of the things I’ve seen a lot over the years is a propensity to think that “things will come right.” Just about every person I’ve seen lose everything has resulted from an unwillingness to make the hard calls early. Property can catch us out. The assumption that it will sell and that we’ll get maximum price is simply not viable. Neither is the assumption that the bank will let us have the proceeds and not require us to repay other loans.


Property isn’t as liquid as you might think. Just try selling an investment apartment in this market, especially one under 50sqm. A quick look online and the first apartment I saw was a 49sqm two-bedroom shoebox asking $375,000. That’s $7,600 per square meter, which is a lot lower than the $12,000 - $14,000 per square meter price new one bedroom apartments are selling at.


With a number of investment apartment builds being completed, we have a plethora of newly minted apartments under 50sqm which banks are reluctant to lend on. We also have a tighter set of lending rules with property investors tapped out at 65 percent LVRs and banks reluctant to lend to non-residents.


All of this is a recipe for lower prices on investment apartments at a time that a lot more are coming on stream. It could also mean some good potential buys like the one above.


I’m also seeing a few speculative land bankers come unstuck. Rule one of the speculator’s handbook should be to not leverage unproductive / unconsented land when liquidity disappears.


For a few years we had speculators flipping land for ever increasing and ridiculous prices. I saw one deal this week with $4.2m of lending and an inability to service the debt from income. Although the owner is a resident, I suspect the beneficial owner is overseas and was the final player in a game of pass the parcel. They simply won’t be able to sell it in this market for a price that works.


These are both narrow parts of the market with their own nuances. A broader look at the market shows that house prices have remained static over the past year and fallen over the past six months. Within that there will be winners and losers.


Fundamentally, Auckland is still growing with full employment and strong immigration. And the structural issues around housing aren’t going away anytime soon. We’re noticing more activity so far in 2018, so the stalemate of late last year has begun to ease. That’s good for liquidity but I don’t think it’s about to take off again.


We’re still in a riskier property market with tight credit conditions. And at some point, probably not this year, we will have to face into tighter monetary conditions and higher interest rates.


If you’re making investment or business decisions, I’d suggest not over extending yourself and make sure you watch your cash flow. It doesn’t feel like the sort of market to be making “leveraged bets” in.


Source: https://www.squirrel.co.nz/blogs/mor...ousing-market/

[Davo36]

Wow, interesting.

Does anyone know what the 'mortgagee' newsletter is he gets? And how to receive it?

[Chris W]

Does anyone know what the 'mortgagee' newsletter is he gets? And how to receive it?

Davo36,

Given the large market share (14/24), most likely the B&T listings for mortgagee sales.

You can check their listings here - https://www.barfoot.co.nz/search.asp...ntial&mso=true