Ed McKnight: Opes Partners Economist on the potential changes for homeowners

There may be some good news on the horizon for homeowners. 

Ed McKnight from Opes Partners joined Francesca Rudkin for a chat about the changing factors that could impact Kiwis. 

On the agenda:  

Westpac has cut their interest rates again, is this the beginning of a trend? 

Has the criteria for getting a mortgage changed? What’s the best time to restructure or get one? 

When can Kiwis expect a cut in the OCR? 

LISTEN ABOVE 

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Episode Transcript

Speaker 1 (00:07):
You're listening to the Saturday Morning with Jack Team podcast
from News Talks AB.

Speaker 2 (00:13):
And it is time to talk money. And joining me
now is Ed McKnight from Opie's Partners. And there might
be some good news on the horinas. On the horizon
for homeowner's Ed.

Speaker 3 (00:23):
There is, and it's all to do with the income
side of your mortgage application. And the impact of it
is that first home buyers, investors, and anybody looking to
take out a lot at a loan might find it
slightly easier. And it's not even just on the horizon,
it's already happened. So for example, we've just had National's

(00:43):
tax cuts come in and that gives some people twenty
dollars a week extra in their pocket. Well, if both
you and your partner get that twenty dollars a week
and you're a first home buyer, that could help your
mortgage application to the tune of about twenty two thousand dollars.
So if you're a bit tight on income that's what's

(01:03):
stopping the bank from giving you a mortgage, might help
you out a little bit there For invests slightly more,
that same twenty dollars a week each for a couple
that could give you an extra thirty two thousand dollars.

Speaker 2 (01:14):
So is there any other criteria around getting a mortgage
changing at the moment.

Speaker 3 (01:19):
Well, I'm glad you brought that up, because, of course,
there are two sides to a mortgage application. You've got
to have enough deposit and you've got to have enough income,
and the tax can't certainly help the income side. On
the deposit side, though, the Reserve Bank has changed some
of the rules. I think it was later earlier this month,
maybe the month before, that just went that first time
buyers a few more of them will be able to

(01:40):
get lower deposits, So that means that it's a bit
more likely that they'll be able to get a mortgage
with a ten percent deposit. One other change that I
want to highlight that literally happens this week is that
when you put in your mortgage application, the bank's not
going to see if you can afford it based on
the interest rate you're actually going to pay, which might

(02:00):
be call it six and a half percent. Up until recently,
they've been testing your mortgage application at nine percent. Well
that's all changed this week. It's come down by a
little bit, and the impact is that for a first
home buyer, if you could borrow five hundred k before,
you're now going to be able to afford an extra
eleven k. And for an investor, it's about in an

(02:20):
extra eighteen grand.

Speaker 2 (02:22):
So ed, why were they calculating that on such a
high rate to begin with?

Speaker 3 (02:28):
Well, the banks want to make sure that even if
interest rates go up, that you can still afford that mortgage,
and that's really important. We've seen why that's so important recently.
You know, back when interest rates were two point two
two point three percent, the banks we're using about a
six percent what we call a test rate, and that's
just to make sure that as interest rates go up

(02:48):
and they have recently, that you'd still be able to
make those mortgage payments and that you wouldn't have to
go to mortgage g sales. So it's very important that
the banks do this. But now that they're seeing those
interest rates come down, they're starting to say, hey, we
can use a lower test rate.

Speaker 2 (03:04):
Have I gone far enough with these changes, do you think? Well?

Speaker 3 (03:08):
I'm looking forward to seeing some more changes. I think
we'd all like to see those test rates even lower.
But the banks need to be cautious and it's important
that they are. There are some other changes coming on
the horizon, the Triple CFA. That's the law that do
you remember back on the day for a couple of
years ago, we had all of these articles about if
you spent too much on coffee or you spent too

(03:30):
much on Uber each.

Speaker 2 (03:31):
I've got too many streaming services?

Speaker 3 (03:34):
Ed, Oh, do you know what? I was applied for
wokts the other day for Chesca, and the walk breaker
comes back to me and says, can you please explain
the nature of these expenses? And one of them was Netflix,
And I said, I'm not sure what you want me
to explain, pretty straightforward, but we are sex of changes
already come and west Pax loosen some of the criteria

(03:56):
specifically for investors. That means an investor might be able
to borrow extra eighty thousand dollars. I'm looking forward to
seeing some changes once the law is actually passed, or
the updated laws actually passed. It's going to be really
good for the first time buyas Ed.

Speaker 2 (04:10):
Thanks so much for your thoughts this morning. Appreciate it.

Speaker 3 (04:12):
Thanks Francis.

Speaker 1 (04:14):
For more from Saturday Morning with Jack Tame, listen live
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