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Bring on 2022 some say. Last year was hard for a lot of us in many ways, not to mention the covid-related ones.
Our home buyers watched as house prices continue to sky-rocket, banks toughen up on lending (see **below), and interest rates leap upwards.
It was enough to sour the dreams of many first home buyers in 2021, leaving many hopeful that 2022 might be a bit sweeter.
Well, 2022 will be a mixed bag. It is still a tough time to buy a house, however, do not get too down.
In this mixed bag of lollies, there are some good ones that may sweeten your chances
We think real estate prices have peaked, and who knows, they may even decrease a touch. This means more bang for your buck, and of course, smaller loans.
We know that there are more houses on the market, and less buyers out there. The market is moving from a sellers’ market to a buyers’ market, which means that buyers have more options in terms of houses to choose from and less competition.
Conditional offers, which were once difficult to buy with, are now being more widely accepted, as sellers have less offers on the table.
What’s more, if you are sitting on a pre-approved finance from the bank, now could be a fantastic time for you to buy. The whole bag of sweets is potentially in your hands, and you have the pick of the lot.
For those without a pre-approval, you will need to be working hard to put yourself in the best position to be buying in 2022.
There are few things you can do to better your chances. Here are my tips to set you in the right direction.
Getting your deposit together is one of the key hurdles to securing a new home. If you are a first home buyer, using your KiwiSaver can be a great option. Consider upping your KiwiSaver contribution from the minimum 3% to a higher contribution rate (but remember, if you don't end up buying property you won't have access to this savings until you retire). Family can also help to bolster savings and many of our clients use this option. (If this is a possibility, do ask us how it may work in your situation).
Keep away from other debt, including 'after pay' options. This is possibly the advice that your parents and grandparents may have given you, and it is never truer if you are setting yourself up to buy property. If you have existing debt, work hard to get rid of it. If you currently have a number of debts, pay the minimum on all of them. Focus on paying off one piece of debt at a time, starting with the ones that charge the highest interest. In terms of student loans, sometimes it is best to have that paid off, but other times it is better to keep it and have more savings. Have a chat to us about your options.
Review your expenses and cut down on them, where possible.
A recent change in the law means that banks are now going through your expenses line by line, reviewing your actual spend each month, revealing every takeaway, coffee, and online shop done. Next time you go to use your card, have a think about if you actually need to spend that money. The last three months of actual expenses are critical to how much a bank will lend. Unnecessary spending will be noted and, may impede your chances of securing your loan.
Banks like stability of income, so regular PAYE income is the most straight forward. Banks require consistency of overtime, bonuses and casual income before they will consider relying on this, and even then, they will only use a part of it. If you are self-employed, banks will rely on the income you paid tax on (and not your sales figure). They will want to see a history of this, so it is going take longer to be able to build up enough evidence for the banks to use this income. If you have options on how you source your income, have a talk to us about the implications.
2022 is a year when it is likely you will need to work hard, and be well prepared, to secure a new home.
The sour truth is that for some, it may not be possible.
While our brokers can’t promise to get you a loan under the current market conditions, we can work through your options, and set you on the right path to maximise the possibility. We are always happy to have a free, no-obligation chat about your situation.
All the best for 2022
Brendon
**Banks have put the handbrake on new lending. There are a few reasons for this (read more in my December blog) however, I don't think it is possible that it will last. These lending restrictions tend to be cyclical. If I was being slightly cynical, I would also add that banks will always work out ways to lend more money when their profits start to drop (and chances are that will happen, if the current lending policy continues as it is.)
About Brendon:
Hi, I'm Brendon, one of the Directors and Advisers at Velocity Financial. I have been giving advice on mortgages and insurances at Velocity for over 15 years, and it is great to be able to work with people to achieve their financial goals. Prior to giving money advice, I worked as a youth worker and managed teams for a not-for-profit organisation. I live with my wife and one of my sons (the other one only stays when he needs food) in Berhampore, and if I'm not talking revolving credit accounts, I can be found running the trails of Wellington.
brendon@velocityfinancial.co.nz
027 2426496
Disclaimer: Brendon Ojala (FSP119244) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Brendon’s disclosure statement on our website.