DTI off the table – will LVR’s be next?

September 2017

DTI off the table – will LVR’s be next?

Debt-to-income ratios are not an option, according to Prime Minister Bill English – and he thinks the Reserve Bank should perhaps consider reasons to phase out its loan-to-value ratio restrictions. This isn’t much of a surprise; LVRs have been a big factor in the flatter house prices, both in Auckland and elsewhere.

While the Reserve Bank would like the option to implement DTIs, the team at SuperCity, like most people in the industry, felt they would have hit first-home buyers the hardest – not a desirable outcome.

LVRs were introduced in 2013 and have significantly tightened up borrowing for the average homeowner. Anyone who bought their first home during the 2000s will remember that 90% loans were commonplace, 95% loans were far from unusual and there was a window of about two years where most lenders were doing 100% owner-occupier loans. You could buy a three-bedroom home with $20,000 in cash – a world away from today’s home-buying environment.

On the bright side, though, interest rates are much lower. At present the official cash rate remains at its historic low, with no signs it’s likely to increase until 2019 and a few commentators wondering whether it will go lower. ANZ’s Cameron Bagrie said in his latest newsletter that “while we can debate whether or not it will lift from current low levels, what is increasingly clear is that it is not going to move by much in any case.”

So no OCR increase. No DTIs. Will LVRs go? English is sending a strong message to the Reserve Bank, but it’s not obliged to act – though if he wins the election he’ll be in a better position to encourage the loosening or even removal of LVRs.

Election Day looms.

The election is only three weeks away and it looks to be a lot more exciting than we were expecting. Last month’s polls showed National way out in front, Labour flagging and the Greens going fairly strong. Well, a lot can happen in a month. National’s still ahead, but down a smidge, while Labour is surging as the Greens fall below the threshold for securing a seat.

September 23 is supposed to be a bit of a D-day for the housing market, too. Analysts can’t decide whether this current flat market is the result of: A) pre-election uncertainty and the usual winter slump, or B) a more long-term “structural shift in house prices”. We’ll see who’s right by about November, or possibly January when prices will either have jumped up again or remained fairly flat. Sales volumes are pretty low, so I’d expect to see those rise as the weather warms up, which will give a better indicator of the true state of the market.

Will housing affordability be tackled by the new government? The two major parties have surprisingly similar policies on this; you can read a nice round-up of political housing affordability measures here.

Your credit rating is valuable.

You have an individual credit rating and it’s used by lenders to decide how risky you are. The less risky you seem, the more money you can generally borrow and the less interest you’re likely to pay. Your credit record includes payments on your credit cards, mortgages, vehicle finance and any hire purchases, and sometimes your household utilities.

When you pay on time regularly, you build up a solid track record that encourages lenders to extend you credit.

If your credit rating is good, it’s easier and cheaper to borrow. But if there’s a mistake in your credit rating, it can have a major impact on borrowing power. If you’re having problems with your credit score, it’s worth checking it to make sure you haven’t been allocated someone else’s debts by accident or through fraud. New Zealand has three credit reporting companies and it’s free to access your credit record. You can find them all and learn how to make a correction to your credit record here.

5 Signs it’s time to review your insurance.

We shine at claim time! And how do we do that? By helping you tailor the right policies for your circumstances. But circumstances change, which is why we contact you each year to talk about reviewing your insurance cover. This service means you’re always kept informed and you’re not left on set-and-forget insurance that doesn’t match your current situation.

Even if we haven’t called you, it may be time for you to call us (don’t be shy! We love to hear from you, it’s all part of the SuperCity Insurance service.)

1. You’ve had a pay rise.
If you’re earning more money, you may need to think about increasing your income protection insurance to match your new income.

2. You’ve married, moved in together or started a family.
When you’re single, your insurance needs are different than when you’re in a couple – and they change again when you’ve got kids. The right insurance protects your loved ones when unexpected events occur.

3. You’ve had a relationship break-up.
If you’re single again after being in a serious relationship, you may no longer need as much life insurance. It’s time to review your insurance to make sure it’s in line with your current requirements.

4. You’ve extended your mortgage, or taken out your first home loan.
More debt may mean you need to extend your insurance so you can service that debt in the event that you can no longer work.

5. It’s been more than a year since your last review.
At SuperCity we always try to contact you if we find a new special deal that will work for you – it’s all part of the free service that is included with your policies. Sometimes our clients are going through a really hectic period in their lives and don’t get a chance to respond to our calls or emails. That’s okay, don’t feel sheepish, just drop us a note when you have a free moment. We’ll be delighted to help.

JAIME JAMES
Managing Director
SuperCity Insurance
021 527 069

Contact Joel
 

Joel Oliver
Managing Director

Level 4, 272 Parnell Road, Parnell, Auckland 1052
PO Box 37303, Parnell, Auckland 1151

0800 INVEST  I  021 884 181

www.supercitymortgages.co.nz
joel@supercitymortgages.co.nz
Text “Joel” to 215 for my contact details
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