Reserve Bank home-loan cooling measures have driven business into mortgage brokers' hands, says Jeff Royle, chief executive of iLender at Whangaparaoa and Freemans Bay.
Restricting loan to value ratios has forced many first-home buyers to find trading bank alternatives, he says, just as people with credit issues, ex-bankrupts, those made redundant or the self-employed often need a mortgage broker.
"It's ostracised the Kiwi first-home buyer. But in terms of what it's done for my business, it's been the best for 10 years. It's driven more people to the mortgage broker community," says the broker, who does around 90 per cent of his business online.
iLender can get money for 90 per cent loans from many sources including Liberty Financial, Southern Cross Financial, Resimac Home Loans and banks. Royle eschews LVR measures, saying the risks of granting 70 per cent loans compared with 90 per cent are negligible if the mortgage holder can't repay the money.
But the move had cut many younger people out of the frame and pushed more investors into buying properties, particularly in Auckland and Christchurch, Royle said.
"The gap is being filled by property investors because the perception among first-home buyers is they need to rent which places more pressure on the already pressured rental markets," he said. "In the last month, we've had eight or nine mortgages for existing clients buying rental properties because the yields are beginning to look really good again."
iLender arranges finance worth about $60 million annually, has hundreds of customers and is able to secure 90 per cent loans on a two-year term for around 6.55 per cent, which Royle said was only slightly ahead of trading banks at about 5.75 per cent floating or 5.8 per cent two-year fixed.
Reserve Bank governor Graeme Wheeler said the main threat to our financial system was the risk associated with imbalances in the housing market and LVRs were one way to redress that.
"The household sector has high and rising levels of debt relative to both historical and international norms. Both households and banks are highly exposed to the housing market," Wheeler said. "Further, we have a situation where house prices are rising from already-overvalued levels, particularly in Auckland and Christchurch. This is increasing the risk of a future house price correction that could result in significant financial system stress."