I t’s no secret that New Zealand’s inflation is causing everyone a whole lot of issues. Living expenses have increased, fuel prices have made us wary of how we use our cars, and the list goes on.

What scares most people looking to buy homes is the continuous rise in banks’ interest rates. The last time rates were this high was during pre-Covid times (around three years ago) and even in that market houses were selling at a cheaper rate compared with now.

So, why are we saying that now is the best time to purchase your first home?

It’s not just because we’re overly optimistic.

Buyers' Market

The rising interest rates have actually become a bit of a blessing in disguise.

The side effect has turned out to be great for buyers who have backed off in the past year from purchasing properties because it was simply too expensive. Not to mention the demand was so high that auction rooms were packed, so bidding competitiveness was at an all-time high.

Now not so many want to take on a huge home loan house prices have had to drop due to decline in demand. It isn’t that great for sellers who are hoping to sell using last year’s prices, but fortunately for first home buyers, especially, it means prices have dropped or at least calmed to a more reasonable level.

Even ANZ has revealed its search data on people looking for home loans has dropped, meaning there are fewer people in the market wanting to buy right now.

‘The First Home Loan is a very special product from Kainga Ora’

Good Changes

The Credit Contracts and Consumer Finance Act (CCCFA) was properly introduced in March, and if we’re being completely honest this made getting a home loan much harder.

There were a few rules that created more stress for first home buyers. One such rule was that lenders had to check borrowers’ regular spending habits and use it against how much they can borrow. This meant they had to minimise spending and stop their daily $5 coffees. Unfortunately, it also included regular payments into their savings accounts. All these rules meant a potential change in lifestyle for buyers.

Now, the government has relaxed somewhat by taking away savings payments as a “regular expense”, so if you’re a super saver this is great news. Other spending habits, like daily coffees or weekly takeaways, have become more flexible whereby borrowers can say they will change that spending behaviour. In essence, banks won’t necessarily use it against your borrowing power.

Special Product

Previously, you could only purchase a home in Auckland that topped at the $625,000 mark. In Auckland, that’s probably a one or two-bedroom apartment/unit and if you have a family it will be a struggle with limited space. The First Home Loan is a very special product from Kainga Ora, special in a way that there is no purchase price cap when it comes to buying your first home. Best of all, you only need a 5 per cent deposit. They have also increased the salary cap for applicants. So, if you want to apply on your own, the most you can earn is $95,000 a year, which is already quite high for a solo income. But if you and a partner (joint income) are applying together, the limit is $150,000.

For a struggling first home buyer, this is a significant helping hand, as you may be able to purchase a million dollar home as your first property. To put icing on the cake, as a first home buyer you will be eligible for the First Home Grant. Again, coming from Kainga Ora, you can get free money! For a joint income application, you can get a whopping $20,000. There are some minor hurdles for this grant; it has to be your first home, you would have to be contributing to the KiwiSaver scheme for a minimum of three years consistently, and you have to agree to live in the property for six months. Easy, right?