Property sales in Auckland during June were 4.3% higher than last year and prices are remaining stable, according to Barfoot & Thompson’s June residential report. This suggests the property market is still humming as usual.
While it may be a good time to buy property, it might be a hard time to finance it. Major banks are tightening their purse strings in response to the economic risk of the COVID-19 pandemic and some borrowers are feeling the pinch.
That’s why, if you want to buy now could be a better time than ever to apply for finance with a non-bank lender.
An alternative to the major banks
In hard economic times, NZ’s major banks adopt a defensive position. Their credit policies may become more strict and they may assess each application carefully to minimise the amount of risky debt on their books.
This makes it more difficult to secure finance from major banks, particularly for borrowers with high LVR loans or bad credit. Borrowers who are stretching their finances a little to buy their first property or their next dream home might also find securing a loan difficult.
In these cases, it’s worth considering non-bank lenders. These guys are kind of like banks, except they’re a bit smaller and often have less strict credit policies.
If the banks say no – these guys might just say yes.
COVID causes a surge in the non-bank sector
Non-bank lenders only made up 3% of total residential lending in March 2020 but that’s up from 1% in 2016, according to the Reserve Bank. And recent news reports indicate that the reaction of major banks to COVID-19 has been driving customers toward the sector.
It’s easy to see why this is happening. Non-bank lenders have less strict credit policies and can approve home loans more readily, often with interest rates comparable to major banks. Applying through a non-bank lender may be a good option for you if you:
- Have had an application denied by the bank.
- Have less than a 20% deposit.
- Have a low income relative to the size of your loan.
- Have bad credit.
- Are self-employed
- Have a unique lending situation that the banks can’t handle
These are crazy times but you don’t have to put your dreams of home ownership or investing on hold. Get in touch with the team at Money Empire for help dealing with non-bank lenders and securing your next home loan.
