First home buyers are feeling under pressure to snag a property before their mortgage pre-approvals expire and the amount of money they can borrow potentially diminishes.
The number of enquiries for entry level houses has increased within the last week, according to real estate agents, with one saying he has been inundated with enquiries in the last 24 hours since the Official Cash Rate had its biggest increase on record.
Harcourts Epsom real estate agent Glen Foster said there are “tonnes” of first home buyers looking and their urgency seems to have increased in the last few days as they try to buy a house before their 90-day pre approval from the bank expires.
The concern is that the change in the Official Cash Rate to 4.25% could see banks increase their servicing test rates which they use to calculate home much someone can afford to borrow and as a result they may not be able to spend as much.
Start your property search
Foster sold an entry-level property on Blockhouse Bay Road at auction on Wednesday night and before he even had a chance to update the listing, he had received more than a dozen email and phone enquiries.
“One person called me and said: ‘Do you have something similar; we need to buy. We need to buy before our pre-approval expires.’ And that’s the pressure from the OCR.”
A woman he has been helping to find her first home has missed out seven times and even bid $30,000 over her budget, he said, which “shows there’s some level of desperation coming in”.
Another buyer stopped bidding on an auction several hundred thousand dollars below his limit as a direct result of this week’s announcement that saw the OCR jump to 4.25%, he said.
Within a day of the OCR being hiked again, Lodge salesperson Chase Gray has shown three groups of first home buyers through properties.
While he can’t say for sure whether the buyers were prompted by the change in the OCR, all three enquiries came in after Reserve Bank Governor Adrian Orr took to the stage.
There was also a significant jump in the number of first home buyers attending open homes for entry-level properties at the weekend, he said.
A three bedroom home for sale at 2/8 Havana Place, in Glenfield, Auckland. It's priced at $940,000. Photo / Supplied
The price of this three-bedroom home at 41A Winning Terrace, in Dinsdale, Hamilton, has been reduced to $569,000. Photo / Supplied
“I did about six open homes in the low under – about $750,000 and under – and our open home have dropped to about five or six per weekend across the board, but I saw about 15 groups and all first home buyers... Everyone knew the OCR was going up so it could have played a part.”
A property at 41A Winning Terrace, in Dinsdale, which has been on the market for five months and has an asking price of $569,000, also attracted five groups of first home buyers through, which he said was a good turn out for a property that had been on for a while.
Along with some people aware that the bank stress testing rates might increase, there are also a lot of people wanting to move into their new home before Christmas.
“The lower-end of the market has definitely picked up – there's more activity.”
Harcourts Glenfield salesperson David Ding had a deal fall over on Wednesday and said it had crossed his mind that the buyer may have got worried that they may not be able to afford the mortgage because of the OCR announcement earlier that day.
And while Ding hasn’t seen a sudden rush of first home buyers in the last few days, entry-level properties priced below $1m are attracting a lot of interest and getting multiple offers.
EasyStreet mortgage broker Gareth Veale says buyers with pre-approval are anxious. Photo / Supplied
First home buyers also make up about 30% of those purchasing properties at the moment, he said, followed by people either upsizing or downsizing or moving overseas.
The first two weeks of open homes for an entry-level three-bedroom, two-bathroom home on a cross lease section at 2/8 Havana Place, in Glenfield, was a “showcase” and attracted about 40 groups through.
“For those properties in the North Shore in the $900,000 to under $1m mark, they are definitely busier than those priced at $1.3m or $1.5m.”
Easy Street Mortgages director Gareth Veale said first home buyers are starting to worry that they might miss out if they don’t go unconditional within three months of getting a pre-approval for a mortgage.
“It used to be that they (pre-approvals) would just roll-over and roll-over and roll-over, but people are working in that three-month period and they are really anxious about it.”
Veale expects the servicing test rate will also increase as a result of the OCR rising, but he does not think it will be as big as this week’s .75% lift.
“If the servicing test rate goes up, it takes money out of the calculation and reduces the amount of lending you can get.”
