INDUSTRY NEWSNEW ZEALANDNEWS

First home buyers in NZ will suffer from the Reserve Bank’s surprise decision on mortgage deposits

The Reserve Bank of New Zealand’s decision to reduce the number of owner-occupiers that can get a mortgage with less than a 20 per cent deposit is set to have huge impacts on first home buyers, according to CoreLogic NZ.

The Reserve Bank of New Zealand (RBNZ) has reduced the share of owner-occupiers who can take advantage of the scheme from 20 per cent to just 10 per cent. CoreLogic NZ has suggested this will have a significant impact on first home buyers.

Amid the broader surge in property values, first home buyers were already often trying to find additional funds to purchase a spot on the property ladder. In June 2021, buyers paid about $150,000 more than the same time last year, CoreLogic noted.

In turn, the overall rise also meant an ever-increasing deposit hurdle, which some have been getting past by entering with less than the standard figure of 20 per cent.

More than than three-quarters of all owner-occupier lending done outside the 20 per cent deposit speed limit went to first home buyers in June, a figure that has steadily risen over time.

Put another way, 38 per cent of all first home buyer lending in June was done with less than a 20 per cent deposit. This exemption or speed limit has been a key support for first home buyer demand in the property market. 

But last week, the RBNZ announced their intention to reduce the cap for low-deposit owner-occupier mortgages from 20 per cent of lending flows to just 10 per cent.

The RBNZ has recommended the change start from 1 October, but CoreLogic has warned that banks may move earlier than that.

CoreLogic estimated that potential home buyers will have to find an additional $50,000 in Christchurch, $81,000 in Wellington or $90,000, according to average house prices.

Source: CoreLogic NZ

CoreLogic also identified which areas have a larger first home buyer market share so far in 2021. Kawerau was used as an example with 12 percentage-points above average (34 per cent so far in 2021 versus average of 22 per cent).

Put another way, these first home buyer ‘hotspots’ might feel the pinch a bit more than others.

CoreLogic indicated first home buyers may have to compromise on property type or location to get their foot on the ladder.

But the ability to purchase a property with a lower deposit than other buyers has clearly been a significant support for FHBs in recent times. CoreLogic indicated this may funnel even more demand towards new-builds.

Show More

News Room

If you have any news for the Real Estate industry - whether you are a professional or a supplier to the industry, please email us: [email protected]