Have your say: Should the govt back 10 year first home mortgages at 5-6%?

Simon Collins at NZHerald reports this morning that the government is considering backing a plan for 10 year fixed rate mortgages for first home buyers at low rates of between 5% to 6%. Currently the longest fixed rate loan in the New Zealand market is a 7 year loan from BNZ at 9.09%, our mortgage rates table shows.

The scheme, promoted by the Tindall Foundation-backed New Zealand Housing Foundation and associated trusts, would provide 10-year mortgages for first homes at fixed rates of around 6 per cent. David Cole, who chairs the Queenstown Lakes Community Housing Trust and was part of a team commissioned by the foundation last year to develop affordable housing proposals, told a conference in Auckland yesterday that banks could be required as a condition of their licences to put a percentage of their lending into the scheme. The group also plans to take the idea to major institutional investors, such as the NZ Super Fund, the ACC, the ASB Trust and other regional community trusts. Housing Minister Phil Heatley was at the conference - organised by the Australasian Housing Institute - and said the group had presented the idea to him and was now working on a more detailed proposal. "The idea of giving first-home buyers certainty when it comes to interest rates is valuable," he said. "There has been no formal agreement. We are engaging with them. On the face of it it's a new idea out of left field that looks pretty solid and well thought through."

My view I suspect this will go into the 'not-solid or well thought through' basket when the government has a much closer look. It's surprising the government is still entertaining this idea that housing affordability is a financing issue rather than a house price issue. We already have plenty of banks willing to lend plenty of money to first home buyers, if only they could afford to borrow the amounts needed to a buy a first home. The idea that the government would force the banks to lend 10 year mortgages at 5-6% is also off the planet. Who would force the banks? The Reserve Bank? It's not going to happen, but it would be nice if the government focused on the real problems of affordability, which are not enough cheap land, high construction costs and low real wages. Your view? We welcome your comments and insights below.