In my previous blog, I summarised exactly what’s been happening with the economy over the past few years (a lot!), and what it’s all meant when it comes to getting a mortgage in Auckland. Now, let’s take a look at what else is in store – and how it could impact you.
Debt To Income tool requested
The Reserve Bank have formally approached the government to allow them to have a new macro-prudential tool at their disposal – debt to income ratios (DTIs).
This has serious potential to hit the market really hard depending on how it is rolled out. The often talked about comparison is England where this already exists – lending there is restricted to 4.5 times your income. A DTI ratio at that level in an Auckland context would be disastrous for lots of people, especially first home buyers. Ask yourself if you’d be able to buy your current house if your borrowing capacity was limited like that?
If DTIs were introduced then I hope like hell they apply a sensible limit and target it so that it applies to specific segments of the market – ideally excluding first time buyers and people improving the housing shortage by building new dwellings.
What’s in store for 2017 then?
Based on what the Reserve Bank is considering, and the impact of the changes over the past few years (check out my earlier blog for those), I see demand eventually cooling. If you were hoping for property prices to fall or crash then I think you’ll be out of luck because demand for housing is still running high – especially in Auckland and other cities where solid employment exists.
Auctions will be used more selectively and sales by negotiation, or with a price, will become common again.
The LVR (Loan to Value Ratio) restrictions on investors will have started to bite hard and the demand for lower priced property in Auckland will drop off creating a window for first time buyers to get in.
It means that real estate agents in Whangarei, Tauranga and Hamilton will notice fewer Auckland buyers at open homes.
If you’ve got an existing mortgage, you’ll become more interested in your fixed rate because you will be worried about the pain of likely rate rises in the medium term. That’ll be even more important if you took out a big mortgage in recent years because a small change in price will have a noticeable effect.
Cashflow – rather than capital – is going to become a focus where your ability to remain solvent and keep your operation or household rolling will be something lenders look at very closely. Capital seems to have become a little bit scarce, and so only the best borrowers will get any of it.
The best borrowers are those with cashflow and lots of it. Is that you?

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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