Financing property deals getting harder

Anyone looking for finance for a property purchase at the moment may well be having trouble finding money from lenders.

We are hearing a bunch of interesting stories at the moment. The first is that following the global “credit crunch” banks are becoming far more conservative about what sort of deals they will lend money on.

Macquarie put out a research paper on this subject. While the paper was Australian-based the same is happening in New Zealand (after all most of our big banks are owned by the Okkers).

Secondly we have heard stories where brokers have taken good deals to banks, expecting to get them accepted, but the opposite has happened. They said no. This was particularly bad around Christmas, and, according to this broker, lenders have mellowed slightly.

This suggests property investments that are negatively geared or a little speculative in nature may not get a loan.

Added to this situation is increased volatility in world markets that is making it hard for lenders to manage their books. Interest rate comparison site, www.goodreturns.co.nz, has reported that Westpac has withdrawn its two and three year capped rate products from the market and that Wizard has withdrawn five year terms. Also a number of non-bank lenders have pulled longer maturity lo-doc loans.

This is happening at a time when some people like the longer term rates as they are the lowest in the market (albeit at historically high levels).

If you have had trouble getting finance please drop us a line or leave a comment below.