Low interest rates and bank sweeteners fuel increase in home loans for first time buyers

A flurry of first home buyers have hit the Tauranga property market driven by historically low-interest rates and high rents. Banks are also offering sweeteners to seal the deals including thousands of dollars in cash-back incentives and overseas holidays.

Figures from Inland Revenue show 917 Tauranga first home buyers collectively withdrew $22.7 million last year compared to 847 first home buyers withdrawing $18.6m in 2018.

Read more: First-home buyer hotspots: Where to buy

First home buyer 23-year-old Tanieka Smith said it was a dream come true being able to buy a new house off the plans at Papamoa.

She used $24,000 from her KiwiSaver alongside $8000 from a First Home grant that helped her towards a 10 per cent deposit for a modern, architecturally-designed two-bedroom home which was marketed for $508,000.

The Barrett Homes house is on 244sqm and part of the medium density housing development at Golden Sands.

"I really didn't think this would be possible at this stage of my life and I am really lucky. I feel like an adult overnight...but I have sacrificed a lot to get where I am."

Smith, who was expecting her first baby and hoped to move into her home at the end of June, said committing 8 per cent of her wages into KiwiSaver and not going out or to music festivals had fast-tracked her progress.

New Zealand Home Loans Papamoa business owner Roger Tamblin said they were talking to first home buyers nearly every day.

"Money is certainly cheaper and we are now seeing examples of rents that are actually higher than what the interest would be for some clients."

NZHL was also a little different as it did not focus on rates, he said.

"We focus on working with customers to achieve financial freedom faster through a unique and tested loan structure, with the added benefit of personal service and goal setting."

First home buyers were also looking at both the savings accumulated in KiwiSaver and the First Home grant.

"Many are also receiving support from family - a boomer boost if you will - or even purchasing collaboratively with friends or family."

Simon Anderson, managing director of Realty Services, said without question in the past six months first homebuyers had started to come back.

In some instances, people were better off financially to pay the low-interest rates instead of rent and a number of first home buyers were using clever alternative ways of purchasing by teaming up or using family funding.

Anderson said there was a shortage of listings in the market compounded by buyer and investor activity.

Read more: What first home buyers are giving up for a mortgage

BNZ Home Lending general manager Martin Elliott said it had helped 5000 New Zealanders own their first home in 2019 which was 25 per cent more than the year before.

First home buyers had made a comeback to the market he said a moved helped by KiwiSaver deposits and family support.

"New Zealanders are benefiting from historically low-interest rates and a competitive home loan market."

BNZ was currently offering 18-month fixed-rate special at 3.39 per cent and customers were becoming savvy but "incentives like iPads and trips overseas offered by other banks appear to have had little impact on the home loan customers choose".

In his view, customers wanted the best deal and the best rates but BNZ was open to cashbacks dependent on a range of criteria including loan size and loan type.

Read more: No relief for first-home buyers as mortgage restrictions stay

But Kiwibank Product Manager for Lending, Richard McLay said a new home loan of $250,000 or more with 20 per cent equity would earn you a holiday for two for five nights in Fiji - or a cash alternative to a similar value.

The holiday package was proving to be popular, he said.

A customer purchasing a property for $500,000 would typically require a $100,000 deposit but alternative options allowed the deposit to be as low as $50,000 and Kāinga Ora Kiwibank First Home Loan customers can qualify for a loan with a 5 per cent deposit.

ANZ Corporate Affairs external communications senior manager Stefan Herrick said it had more first home buyers seeking loans in the final quarter of 2019 than 2018.

The bank was offering a $3000 cash contribution to first home buyers who met the criteria.

Meanwhile, all ANZ customers could apply for an interest-free home loan top-up, for up to $5000 for either insulation or heat pumps.

Stefan said a $500,000 loan would require a 10 per cent deposit but the bank recommended 20 per cent to avoid low equity premiums and to provide protection against market changes.

Read more: First-home buyer says moaning millennials should forget Auckland prices and move to regions

Westpac regulatory affairs and corporate legal services media manager Max Bania said
new home loan lending may include cash offers to help cover costs including legal fees.

He said research found 44 per cent of parents would be prepared to act as a guarantor, and more than half would lend or gift money to their children to help them buy their first home.

Meanwhile Westpac Prebuilt was New Zealand's only dedicated lending product for prefabricated homes and its Family Springboard product allows first home buyers' families to contribute by using their own home as security on the loan, he said.

"Westpac offers low deposit options but generally requires a minimum deposit of 10 per cent. Deposit requirements are assessed on a case-by-case basis."

Based on OneRoof's latest property report the median value of all housing in Tauranga in 2019 was up 4.7 per cent year on year to $670,000.