Mortgage money limited

Press, 26 November 1981, Page 10

Mortgage money limited

In Residence

Bronwen Jones

PROPERTY REPORTER

Housing finance is not flowing quite ..so freely in Christchurch these days, and the residential property market has slowed considerably. Sales are not going through as fast as they were a few weeks ago, and the current difficulty in getting mortgage funds can be blamed for this, according to Mr Peter Cook, the local branch president of the Real Estate Institute. Because of the slower market, more people are multi-listing their properties in the hopes of getting a quicker sale. Mr -Cook does not think, however, that prices will hold. The natural effects of inflation will continue, and if more money is freed up for housing the residential property market will take off again, he believes. A telephone survey of the main lending institutions in Christchurch reveals that some are lending less because of the stiff competition for savings to lend for mortgages. .

But in addition, even if an institution is not lending less than a year or a few months ago in total funds, the higher cost of housing has meant that mortgages are bigger, and so there is less money to go around. Fewer people are being granted mortgages. The future, for prospective home buyers is not bright, according to the lending institution spokesmen. Funds are expected to tighten next year as the Government (whichever

party it may be) competes with the private sector for savings to help clear the national debt.

Canterbury Savings Bank

The Canterbury Savings Bank is lending less that it was from February to July, but is still lending more than this time last year, reports the general manager, Mr Frank Dickson. About $5 million a month is now going out in mortgage funds, including mortgage finance for home inprovements, compared with between $ll million and $l2 million in May. The reason so much money was available between February and July is that the bank purposely carried excess liquidity through the Christmas period because there had been a rundown of funds the previous year. This was probably an over-reac-tion, and the extra liquidity was parcelled out as mortgage funds, Mr Dickson explains. The lending criteria are now stiffer. People assume that the bank will keep lending at the abnormally high level of a few months ago, and demand is high. This is compounded by the fact that few other institutions are lending much in Canterbury, Mr Dickson maintains.

In addition, the average size of mortgages has increased because of the increased cost of housing; Mr Dickson predicts that whichever party wins the general election, home finance will tighten considerably.

New Zealand has been living on deficit budget financing and cannot overspend for ever. When the day of reckoning arrives, there will be less money to spend, less saving, and therefore less mortgage finance, he says. The current lending rate on first mortgages is usually 14 per cent, and 16.5 per cent on second. Both are table mortgages Bank of N.Z. Mr W. J. Lancaster, the district manager of the Bank of New Zealand, says that the bank is lending considerably less than a year ago.

There have been two cuts in the amount of money available for residential mortgages, the second being

less than two months ago, he reports.

However, he would not say how much is being allocated or how many people are receiving loans each week. Also, he could not say why the bank was lending less, and said that this was a matter of head office policy. The B.N.Z. lends first, table mortages at 12.75 per cent.

Canterbury Building Society The Canterbury Building Society has been lending at around $2 million a month for the last six months, and has no intention at present of tightning up, says Mr Neil O’Brien, the home finance department manager. The total mortgage funds lent will be between about $24 million and $2B million this financial year, compared with about $l7 million last year.

However, although lending has increased dramatically this year, the number of fortunate people has not in-

creased in proportion. This is because the size of mortgages has risen with the increase in housing costs, Mr O’Brien says.

In the last few months, there has been an upsurge of mortgage applications for newly built houses.

The current criteria include a savings record of about three years, though the savings required are not fixed. However, people still on the old terminating system are required to save $5 a week for a $20,000 loan, says Mr O’Brien. Mr O’Brien also has the belief that finance will be tighter next year.

There has been a terrific upsurge in lending, and institutions are chasing the same dollar, he points out. The finance market is not a bottomless pit. In addition, if the Government goes on the market again for funds by issuing more inflation-proof bonds, for instance,- then this will attract money away from private sector mortgage finance, he adds.

But so long as the Government of the day did not dramatically change interest rates, the C.B.S. hoped to be able to handle its liquidity so that any adjustment in lending would be minimal. The society’s interest rate on a first mortgage is 15.5 per cent and 17 per cent on a

N.Z. Post Office

second. Both are table mortgages.

N.Z. Permanent

Mr Chris Green, the branch manager of N.Z. Permanent, says that this building society has been lending progressively less, and the drop now is about 30 per cent down on the same time last year. Only about 20 to 30 mortgages are going out each month now. he says.

The society is finding it difficult to compete for savings with the Government’s inflation-proof bonds and with the high interest rates offered by finance houses. In addition, the size of mortgages lent by the society has risen by about 30 per cent. As times get harder for mortgage funds, criteria get stiffer, and at present people applying for funds are expected to have saved with the society for about six months.

Most of the deposit for the house should have been saved with the society, says Mr Green. The current interest rates are 14.5 per cent for a first mortgage and 16.5 for second. Both are table mortgages.

Lending by the Post Office is climbing steadily if any-

- A thing, reports a Christchurch spokesman. However, larger mortgages are being asked for, and so fewer people are»£i being helped, he says. This would appear to be,'*’ backed by reports that theCj Post Office lending requirements now include the rule fthan an applicant must have - ?- saved $lOO a month for aU year. He responds saying’,*.! that he has been instructed'*; to neither confirm nor deny<> this. V'

The criteria changes ac- ' cording to the availability of funds, he attests. ! There is no doubt that with ,t* higher housing costs, nearly,*; everyone needs a second mortgage, and sometimes third. So demand is high the reasonable P.O. secondmortgages, which are lent - ; out at 12 per cent.

Housing Corporation

Unlike other lending institutions, the Housing Corporation. is not affected by the input of finance and has a yearly allocation. The corporation is still lending under its criteria of a $250 weekly income limit on people wanting, to build and on single income families waiting to buy existing properties, and a $2OO weekly income on dual income families waiting to buy, rather than build.

The corporation.is lending up to $18,500 for first mortgages for existing homes and up to $25,0u0 for new ones. The interest rate is 9 per cent.