The amount of money first home buyers are paying to get into a home of their own is following house prices down.
Interest.co.nz estimates first home buyers paid an average purchase price of $655,000 in July, down $21,000 compared to July last year.
The estimated average price first home buyers have been paying to get into a home of their own has declined by $53,000 since it peaked at $718,000 in April 2022.
This means they have also been borrowing less.
According to Reserve Bank lending figures, the average size of the mortgages approved to first home buyers in July was $548.000, down from a peak of $595,000 in May 2022. This suggests that on average, first home buyers are carrying around $47,000 less debt than they were two years ago.
However that debt will be expensive for some of those borrowers, because 35% of the mortgages approved to first home buyers in July were low equity loans where the borrowers had less than a 20% deposit.
Banks charge a healthy premium for those types of loans, which pushes up their mortgage payments significantly, and with mortgage interest rates only just starting to retreat from their recent highs, the borrowers with low equity mortgages are likely paying plenty for the privilege.
The proportion of low equity loans being taken out by first home buyers has been tracking steadily upwards for the last couple of years, from 25% in July 2022, to 31% in July 2023 and 35% in July 2024.
The Reserve Bank figures also show 2583 mortgages were approved for first home buyers in July and their numbers have been around the 2500 a month figure for the last five months, which is about the same as it was in the middle of last year, suggesting their participation in the housing market remains relatively stable.
However with house prices generally remaining soft and interest rates expected to continue on a downward slope for the next year or so, we could well see an increase in the number of first home buyers getting into a home of their own as the market moves into summer.
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