New Zealand’s property market is certainly challenging for first-time buyers and in addition to finding (and affording) a home, first-timers have to negotiate the previously-unknown word of home loan comparison, application and approval processes. New Zealand’s financial institutions can play a vital role in educating and informing buyers.
Each year CANSTAR researches what’s on offer to first home buyers from New Zealand’s banks so we can determine who offers outstanding value in this market segment.
To do this we look at the financial institution’s fixed rate and floating home loans. We also take into account the availability of face-to-face staff, whether in branches or working as mobile lenders within each island. Lastly, we take into account the access each bank offers to vital educational material so necessary for a first home buyer – from calculators that work out how to save for a deposit through to the whole box and dice involved with buying a property.
In 2016, for the sixth year in a row, Kiwibank has taken CANSTAR’s Bank of the Year – First Home Buyers Award for its winning combination of competitively-priced products, its range of customer service options and its wealth of educational material available to the first home buyer market.
We caught up with Kiwibank’s Head of Lending, Kerry Boielle, for a quick Q&A on home loan habits and how to prepare for a loan application.
Q: How has the market changed for first homebuyers over the past 12 months?
A: It has been a big 12 months for home buyers in general! It is still a tough market for First Home Buyers to get their foot in the door but things like lower interest rates, loosening on Welcome Home Loan rules and tightening on investor rules are opening the door for some lucky house hunters to get on the ladder who would otherwise not have been able to do so. I can’t speak for all the banks but Kiwibank certainly feels a responsibility to help First Home Buyers as much as we can.
Q: It can be difficult to get a deposit together first time around. What size deposit do you typically see with first home buyers?
A: Our typical First home Buyer deposit is between 10% and 20% (with many more achieving the 20% deposit than what some may think). The majority do find themselves in the lower equity category though which makes schemes like the Welcome Home Loan look even more attractive.
When it comes to size of the home loan, First Home Buyer s cover a large spectrum and those in Auckland are definitely paying more than any of their friends just a bit further down south. Average loan sizes are very similar to those of the population.
Q: Have you noticed any change, over the last year or two, in the proportion of customers choosing fixed over variable interest rate?
A: This has remained reasonably steady over time. On average customers settle about 20%-25% of the loan on variable portions and fix the remaining. With fixed rates so low at the moment it is easy to understand why, but we think the ability and flexibility to pay your loan off faster that a variable loan gives you is underutilised and underestimated in the current rate environment.
Q: Any tips for first home buyers on how to prepare for a loan application?
A: Take the time to get the correct information first time and it will save a lot of repeat and frustration on your part. You can find a good look at what you can have ready here. Ask as many questions as you possibly need – there are definitely no stupid questions. Friends and family can be great sources advice but before making the final decisions it’s always worth consulting with a professional to make sure you are on the right track for you.
CANSTAR congratulates Kiwibank on its six-years-in-a-row achievement. You can read the CANSTAR First Home Buyers report here.