Make a New Year resolution to become a first-home buyer

Thanks to low interest rates, help from KiwiSaver, and house-price affordability ticking higher, 2020 looks set to be the year of the first-home buyer. 

 

As the smoke clears from the New Year’s Eve firework displays, and the first sunrise of the new decade reveals the dishevelled mess from the previous night’s celebrations, most of us will have our minds focused on the prospect of the coming months and the many opportunities they promise.

Each new year is a time to take stock, set goals and make fresh starts. And for those planning their first steps on the property ladder, 2020 looks set to be the perfect year to make a resolution to hit the open homes in the summer sun and become a first-home buyer (FHB).

Interest Rates

Taking out a mortgage in New Zealand is cheaper than it’s ever been. Current interest rates are at historic lows, so now is the time to lock in a rate. Lenders are eager to attract first-home buyers and are offering great incentives, such as cashbacks and even Fly Buys points at the BNZ. To make an informed decision about which mortgage is best for you, check out Canstar’s updated home loan interest rates. Just hit the button below.

Compare home loan rates for free with Canstar!

KiwiSaver

According to Reserve Bank statistics, lending to FHBs is at the highest point in two years, comprising 18% of all lending last October and up 20% on the previous year’s figures. Part of this increase can be attributed to KiwiSaver and being able to withdraw money for a home deposit. In its latest KiwiSaver report, the Financial Markets Authority recorded a 32% increase in the number of first-home withdrawals. There’s also extra help for KiwiSaver members in the form of the KiwiSaver HomeStart grant, which can be worth up to $20,000.

Affordability

OK – pushing the idea that NZ homes are affordable is probably going a bit too far. But according to Massey University’s September 2019 Home Affordability Report: “The yearly results show an annual result of a solid increase in affordability at a national level of 5.2%.”

This is partly due to lower house-price inflation, which according to CoreLogic’s November House Price Index is sitting at 3.3%, which is a lot lower than the double-digit increases seen from 2015-17, and is comparable to average wage increases over the same period: 3.7% nationally.

However, the heat does seem to be returning to the market. With strong migration of around 50,000 extra people each year, and the construction industry’s ever-present constraints – which limit the number of new houses coming onto the market ­– a lot of experts are predicting stronger growth over the next 12 months. So, if you are considering buying, early 2020 is shaping up as the perfect time to buy.

First-home Buyer’s Checklist

Once you’ve made the decision to buy, and researched the best rates, it’s time to get your finances in order. Work through our check-list and you’ll maximise your chances of securing a mortgage on a first home:

Clean Up Your Credit

The first thing any lender is going to do is check your credit history. If you’ve multiple small outstanding balances, get rid of them. If you are able, pay off any personal loans or credit-card debts. If not, consolidate them under one low-interest loan or transfer them to a low-interest credit card. Your track-record needs to be as clean as possible. You can compare credit cards for free using Canstar’s comparison tools.

Cut Your Spending

Focus on the non-essentials and clip discretionary spending. Check your bank account for regular automated payments and get rid of any service you can live without: think gym memberships, think Netflix. Check your insurance policy, phone and broadband plans, and electricity provider and shop around for a better deal. You can compare phone, insurance and utility services for free using Canstar’s comparison tools.

Increase Your Income

Earn more! Yes, it’s easy to say, but have you ever tried asking your boss for a raise? You could be pleasantly surprised … or look for a better paid job or part-time work on the side. Anything you can do to improve your cashflow will increase your borrowing power.

 

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