A first-time home buyer sees the amount the bank is willing to lend drop by $80,000 in six months.

Sheena Tavioni has seen the amount her bank lends her to buy her first home drop by $80,000 in six months because interest rates have driven up the cost of borrowing.

The Oakland woman said the cut, which dropped her pre-approval amount from $830,000 in June to $750,000 in December, immediately reduced her ability to compete for the property.

His broker, Cameron Sinclair, of Rod Schubert Financial Advice, said many customers had seen similar reductions in their pre-approval amounts as a result of the rapid rise in interest rates, and as a result, the test rates banks use in calculator services.

Banks use a higher rate than the current advertised rates to gauge whether buyers can afford the loan.

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Sheena Tavioni planned to make a home in Rarotonga, but when her family's clothing brand, Tav Pacific, took off in New Zealand, she decided she wanted to stay in Auckland.

supplied/material

Sheena Tavioni planned to make a home in Rarotonga, but when her family’s clothing brand, Tav Pacific, took off in New Zealand, she decided she wanted to stay in Auckland.

By combining some basic economic theory with what we see in real time in the market, it can be assumed that this reduction in the borrowing capacity of home buyers across the country is definitely having a negative impact on property prices. ,” He said.

With interest rates rising, many potential buyers were concerned that their repayment obligations might be too much to manage, Sinclair said.

Tavioni said he does not intend to spend the maximum amount he can afford.

“I have a deposit which makes me a bit upset, but paying back $750,000 is almost $5,000 a month – it’s ridiculous.”

I’m just stressed for the next 30 years to pay it off, almost all of my wages go towards paying off my loan, and that’s it, I have to try and get money from somewhere else to make ends meet. He said.

Cameron Sinclair, of Rod Schubert Financial Advisors, said that given the tight conditions investors face, their ability to borrow will become proportionately harder as interest rates rise.

supplied/material

Cameron Sinclair, of Rod Schubert Financial Advisors, said that given the tight conditions investors face, their ability to borrow will become proportionately harder as interest rates rise.

Despite reports of falling prices, Tavioni said the Auckland market remains tough, largely due to landlords refusing to lower their asking prices.

Some properties have been on the market for a long time, he said, but he has yet to see many surrender and lower his expectations.

His experience is supported by the data, which shows the lowest number of sales nationwide in December since 1995.

Tavioni doesn’t believe home prices will fall much, despite prices nationally falling by roughly 14 to 16 percent in 2022, with most commentators predicting another six to 12 months of decline.

“There was one property that I inquired about, and I think I could have paid, and then I came back the next week to inquire about it again and the owners had raised the prices, so I was like, what the hell? ?” He said.

Many owners don’t need to sell — some have multiple investment properties — and prefer to sit on their properties rather than sell, he said.

“They say the prices have gone down, but I think it’s the same,” he said.

Tavyoni, 41, is a business manager for her family’s ethical clothing company, Tav Pacific, and does her own shopping. He has been looking for his first house for a year and a half.

James Wilson, head of Value Added Valuations, said: “Recently about a third of property purchases are made to first-home buyers, so if the amount banks are willing to lend to these people falls, it is likely to have an impact on prices.” had Types of properties that are usually bought.

Almost every day, Valocity heard stories from buyers who didn’t realize how quickly rising interest rates would reduce their borrowing, he said.

Those who do may find themselves racing to secure homes before their banks reappraise them.

“The longer they wait, the more likely their pre-approval amounts will be reduced,” he said.

James Wilson, Valocity's head of appraisals, says first-time home buyers feel the need to buy before their down payment drops.

Abigail Dougherty/case

James Wilson, Valocity’s head of appraisals, says first-time home buyers feel the need to buy before their down payment drops.

First-home buyers have largely filled the gap in some markets, he said, as investors backed away from the reintroduction of loan-to-value restrictions, and the government announced that investors’ ability to deduct mortgage interest would be reduced. It has gradually removed the rent from the income. For tax purposes

It remains to be seen whether the borrowing problem for first-time home buyers will affect the broader market.

“Over time, as the market softens a little bit and people cut down on values, everyone pulls out to bargain, and the effect tends to trickle down,” he said.

But homes were scarcer in wealthier areas, and Wilson said owners may still be able to get the prices they expected from eager buyers.

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