The New Zealand mortgage market is constantly evolving, and 2024 is shaping up to be no different. Whether you’re a first-time homebuyer or looking to refinance, understanding the latest mortgage trends can help you make the best decisions for your financial future. In this blog, we’ll explore some of the key trends in the mortgage market this year, including changes in interest rates, lending criteria, and the types of mortgages that are becoming more popular among Kiwi homebuyers.
Interest Rates: What’s the Forecast?
Interest rates are always a hot topic when it comes to mortgages. In 2024, we’re seeing some interesting movements that could affect both new and existing borrowers.
Stable but Variable Rates
After several years of fluctuating interest rates, 2024 is expected to see a period of relative stability. The Reserve Bank of New Zealand has indicated that while there may be minor adjustments throughout the year, significant rate hikes or drops are unlikely. This stability is good news for homebuyers, as it allows for more predictable budgeting and planning. However, it’s important to remember that interest rates can still vary significantly between lenders, so shopping around for the best deal remains crucial.
Fixed-Rate Mortgages Remain Popular
Fixed-rate mortgages continue to be a popular choice among New Zealand homebuyers, particularly in an environment where rates are stable but uncertainty remains about the future. Locking in a fixed rate gives borrowers peace of mind that their payments will remain the same for a set period, which can be particularly appealing if you’re planning to stay in your home for a while. In 2024, many lenders are offering competitive rates on fixed-term mortgages, making this a good option for those who prefer stability.
Lending Criteria: Getting Tighter or More Flexible?
Lending criteria have a significant impact on who can get a mortgage and how much they can borrow. In 2024, we’re seeing some shifts in this area that could affect potential homebuyers.
Stricter Loan-to-Value Ratios (LVRs)
One of the biggest changes in 2024 is the tightening of loan-to-value ratios (LVRs). The LVR is the percentage of the property’s value that a lender is willing to finance, and it’s a critical factor in determining how much of a deposit you’ll need. This year, many banks are increasing their LVR requirements, particularly for investors. This means that homebuyers may need to come up with a larger deposit than in previous years, which could make it more challenging for some to enter the market.
Greater Emphasis on Affordability Assessments
In addition to stricter LVRs, lenders are also placing a greater emphasis on affordability assessments. This means that they’re not just looking at your income and debts but also considering other factors like your living expenses and financial commitments. As a result, you’ll need to provide more detailed information about your finances when applying for a mortgage. While this might seem daunting, it’s actually a positive development, as it helps ensure that borrowers aren’t taking on more debt than they can handle.
Types of Mortgages: What’s Hot in 2024?
With the mortgage market constantly evolving, it’s no surprise that the types of mortgages available to New Zealand homebuyers are also changing. Here are some of the most popular options in 2024.
Green Mortgages: A New Trend for Eco-Conscious Buyers
One of the most exciting trends in 2024 is the rise of green mortgages. These are special loans designed for homebuyers who want to purchase or build energy-efficient homes. Green mortgages often come with lower interest rates or other incentives, such as reduced fees, to encourage eco-friendly building practices. With climate change being a significant concern for many Kiwis, green mortgages are expected to become even more popular in the coming years.
Interest-Only Mortgages for Investors
Interest-only mortgages are also seeing a resurgence in popularity, particularly among property investors. With an interest-only mortgage, you only pay the interest on the loan for a set period, usually five to ten years. This can result in lower monthly payments, making it an attractive option for investors looking to maximise their cash flow. However, it’s important to remember that you’re not paying down the principal during the interest-only period, so your overall debt remains the same.
Split Mortgages: The Best of Both Worlds?
Split mortgages are another option gaining traction in 2024. With a split mortgage, you divide your loan into two parts: one with a fixed interest rate and the other with a variable rate. This can provide a balance between stability and flexibility, allowing you to take advantage of potential interest rate drops while still having the security of a fixed-rate portion. For those who want a bit of both worlds, a split mortgage could be a great choice.
Technology and Mortgages: The Digital Revolution
As with many industries, technology is playing an increasingly important role in the mortgage market. In 2024, we’re seeing more and more lenders offering digital tools and platforms to make the mortgage process easier and more efficient.
Online Applications and Approvals
Gone are the days of endless paperwork and in-person meetings with bank managers. Today, many lenders offer online applications and instant approvals, allowing you to apply for a mortgage from the comfort of your home. This can save a significant amount of time and hassle, making the process much more convenient for busy homebuyers.
Digital Mortgage Brokers
Digital mortgage brokers are also becoming more popular, providing a convenient way to compare mortgage options and find the best deal. These platforms use algorithms to match you with suitable lenders based on your financial situation and preferences, making it easier to navigate the mortgage market. While they don’t replace the personalised service of a traditional broker, they can be a helpful tool for tech-savvy homebuyers looking to streamline the process.
What Does This Mean for Homebuyers?
So, what do these trends mean for you as a homebuyer in 2024? Here are a few key takeaways:
Do Your Homework: With so many options and changes in the market, it’s more important than ever to do your research. Compare different lenders, mortgage types, and interest rates to find the best fit for your needs. We can help you with that by helping to assess your need and knowing what the different lenders have to offer.
Be Prepared: Stricter lending criteria mean you’ll need to have your financial ducks in a row. Make sure you have all the necessary documentation ready and be prepared to provide detailed information about your finances.
Consider Your Long-Term Goals: Think about your long-term financial goals and how your mortgage fits into them. Are you planning to stay in your home for a long time, or are you likely to move in a few years? Your plans can impact the type of mortgage that’s best for you.
Embrace Technology: Don’t be afraid to use digital tools to help you navigate the mortgage market. Online applications and digital brokers can make the process more efficient and help you find the best deal. Contact us on line so we can send out our digital assessment tool which can help us together decide the best way forward for you.
Final Thoughts
The mortgage market in New Zealand is constantly changing, and 2024 is no exception. By staying informed about the latest trends and doing your homework, you can make confident decisions that help you achieve your homeownership dreams. Whether you’re a first-time buyer or looking to refinance, understanding these trends will give you a head start in navigating the ever-evolving world of mortgages.
Have questions or need personalised advice? Contact us today to speak with a mortgage expert!
