New home loans fall by more than a third despite cashback wars between banks

Fewer people have applied for home loans compared to the same time last year despite banks offering cash incentives of up to $20,000.

People who are due to refix their mortgage are also facing hundreds
of dollars a week extra in interest hikes, which have decimated some budgets.

A couple who live in the Parkvale suburb of Tauranga, paid $715,000 in September last year for their first home and would need to find more than $200 a week extra when their mortgage rolls over.

The pair, who asked not to be named, said the significant jump would force them to cut their spending.

”We’ll have to tighten the belt around things like groceries and going out.”

The young professionals said rising interest rates were concerning and while they could absorb the costs, others were not in the same position.

In their view, homes were not affordable in New Zealand.

”The idea that you can just save up money for a deposit when houses increase in value far quicker than most incomes is ridiculous. And increasing interest rates forcing mortgage repayments higher is a hit from both ends.

”We don’t see an easy solution to inflation to bring interest rates down quickly.”

A Westpac spokesperson said there were fewer home lending inquiries compared to the same time last year, which reflected the current real estate market.

However, it had seen significant interest in its Bay of Plenty First Home Buyer seminars in Tauranga, Tokoroa and Taupō.

Westpac was giving first-home buyers five chances to win $50,000 off the balance of their mortgage if they draw down before September 30 and those looking to refinance from another bank might be eligible for help to cover associated costs.

BNZ would give 1 per cent of the value of a new home loan or up to $20,000 back to borrowers.

Karna Luke, BNZ executive customer, products and services told the NZME the bank hoped to give people more cash in hand to cover the costs of buying and selling a property.

A Kiwibank spokesperson said its cashback incentive of up to $10,000 had ended however, its one year fixed interest rate had dropped to 5.19 per cent.

She said the bank had recently launched Co-own to provide an alternative way to buy a home.

”We’ve had a positive response and will continue to look at ways to support Kiwis to reach their home ownership goals.”

ANZ incentives included a Blueprint to Build offer with a discounted rate. There were cash contributions towards solicitor or valuation costs and first-home buyers could get $3000 if they kept their home loan with ANZ for at least three years.

A spokeswoman said it was supportive and open to different ways to get people on the property ladder.

”This could include being helped out by parents or family members either by gifting money for a deposit, parents themselves providing a loan for a deposit, becoming a co-borrower, or by providing security by way of a limited guarantee to reduce the LVR.”

An SBS Bank spokesperson said home loan inquiry levels were good and first-home buyers could be eligible for $2000 with their home loans.

Joint home applications, where parents assisted their children with buying a home, were also popular.

All cashback offers were subject to criterias.

Real Estate Institute data showed 13,861 homes were for sale in June last year but that soared to 25,271 nationwide last month.

National house prices rose a median 1.2 per cent from $840,000 in May to $850,000 last month.

However, in Tauranga, the median house price dropped to $970,000 in June from $1m in May while in Rotorua it fell from $649,000 to $615,000 over the same timeframes.

REINZ regional director Neville Falconer said the number of sales in the Bay of Plenty was down by 41.3 per cent last month, compared to June and the market was a challenge.

“Buyers still fear overpaying, which is seeing hesitancy in the market and a decline in sales counts. Properties are also spending longer on the market before selling compared to this time last year.”

Meanwhile, the Reserve Bank raised its official cash rate by 50 basis points to 2.5 per cent in its latest bid to head off inflation.

CoreLogic NZ chief property economist Kelvin Davidson said in terms of annual mortgage repayments it equates to an extra $2050 per year or so for every $100,000 of debt.

”This will be testing the finances of all borrowers, let alone those new to the market, and may mean the affordability equation doesn’t improve much, even as incomes rise and house prices decline.”