First home buyers' housing market activity appears to have remained remarkably consistent over the last 12 months, despite falling interest rates.
The latest figures from the Reserve Bank show 1996 mortgages were approved to first home buyers in February this year, barely changed from 2019 approved in February last year.
That was in spite of the fact the average two-year fixed rate mortgage offered by the main banks declined from 6.83% to 5.09% over the same period.
The amount first home buyers borrowed and the estimated purchase price of the homes they bought, was also little changed over that period.
Reserve Bank figures show the average size of the mortgages approved to first home buyers increased only slightly, from $549,282 to $557,615, up just $8333 (1.5%) for the year.
Similarly, intererest.co.nz estimates the average amount first home buyers paid for their homes increased from $661,000 to $664,000 over the same period, up by just $3000 (0.5%) for the year to February.
The one figure that has changed significantly for first home buyers over the last 12 months is the number taking out low equity loans, where they have less than a 20% deposit.
Their numbers steadily increased from 600 in February 2024 to 765 in February this year.
Low equity loans made up 29.7% of mortgage approvals to first home buyers in February last year, but that figure had jumped to 38.3% in February this year.
While Reserve Bank figures suggest the number of first home buyers getting into a home of their own has remained relatively static over the last 12 months, they also suggest their share of the housing market may have declined slightly.
There is a common misconception that most of the new mortgages issued by the banks are for the purpose of buying property, but that is not the case.
Reserve Bank figures show the majority of new mortgage approvals are the result of people switching banks or refinancing in one way or another.
Of the 16,286 mortgages approved in February this year, just 6057 (37.2%) were for the purpose of purchasing a property, down from 39.8% in February last year.
It is likely that a third of those were to first home buyers, down slightly from 35.2% in February last year.
So while the number of first home buyers getting into a home of their own probably hasn’t changed much over the last 12 months, their total share of the property market may have declined very slightly.
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9 Comments
Testing, testing, 123!
Lingering, like a bad smell...
I would like to see Interest.co.nz focusing more on new purchases of property separated out from the switching data. The switching data measures a totally different issue and needs to therefore be interpreted separately.
KeithW
How do you define "new purchases" Keith?
A new purchase is where a person actually purchases a property.
Bank switching cases need to be removed from the denominator of all data looking at the levels of FHB and post FHB purchases.
KeithW
Thanks Keith.
That's exactly what this story has done:
"There is a common misconception that most of the new mortgages issued by the banks are for the purpose of buying property, but that is not the case.
"Reserve Bank figures show the majority of new mortgage approvals are the result of people switching banks or refinancing in one way or another.
"Of the 16,286 mortgages approved in February this year, just 6057 (37.2%) were for the purpose of purchasing a property, down from 39.8% in February last year.
It is likely that a third of those were to first home buyers, down slightly from 35.2% in February last year."
Yes, but where is the historical data that allows us to see the trends [n these data? What I want to see is the historical data in absolute terms. I suspect that the historical trends in these numbers will be correlated because when a FHB buys it is related to subsequent moves up the ladder of the previous owner of that house who has become a non-FHB buyer.
Investors belong to a different behavioural group; they do not have to sell a house to buy a house. It is possible for investors to become a bigger proportion of the total ownership of homes without any change in their purchase percentage.
if we have the absolute number of houses purchased by FHBs, non-first house buyers, and investors then we can work out what is happening. I think all these numbers are readily available.
In a perfect world, it would also be nice to know how many sales are sales by investors. But that data may not be currently collected. I can more or less work that out from the previously mentioned variables but I would need to factor in the number of new homes built and the number of old homes bowled over.
KeithW
Affect or Effect?
80% of existing mortgages fall due this year.
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