Clearly, the significant changes underway in the mortgage lending sector are topic du jour in the property market. From rising mortgage rates (with more to come), to loan to value ratio (LVR) speed limit changes, to the Reserve Bank’s debt to income (DTI) ratio consultation, to the Credit Contracts & Consumer Finance Act (CCCFA) changes, it’s all happening.
Equally obvious is the fact that reduced credit availability (and at a higher interest cost) will be a dampener on property market activity levels this year, and indeed there’s already a material slowdown in sales volumes in progress. From a total of around 97,500 sales in 2021 (and more than 99,800 in 2020), our forecasting model suggests that this figure could dip to 91,000 or so this year and closer to 88,000 in 2023.
So within that quieter overall picture, a key focus then becomes market share – and on that note, we think the key determinant really comes down to who’s affected least by lending rules. Most groups will be affected, but some more than others. For mortgaged investors, taking a glass half full perspective, a lot of the rule changes have already happened and adjustments made – e.g. 40% deposits have been required for about a year now by the banks (although only enforced by the Reserve Bank from 1st May), and there’s also been plenty of time to fully nut out the effects of lost interest deductibility, even if the rubber will only really hit the road when tax returns are settled.
But for owner-occupiers, especially first home buyers – who were previously the dominant users of the 20% speed limit for low deposit lending – the reduction in this allowance has only just started to take hold. In fact, in November, still 10.5% of...
