Here's how much falling interest rates are helping first-home buyers
Photo:
RNZ
A drop in home loan rates over the past year could make a first-home mortgage about $800 a month cheaper.
Westpac and Cotality, formerly Corelogic, have released their latest first-home buyers' report, which shows they remain a strong presence in the market.
First-home buyers represent about 25 percent of all purchases. In Wellington, they are 36 percent, Hamilton 30 percent, Auckland 27 percent and Christchurch 26 percent.
Typically, they were more like 21 percent or 22 percent of transactions.
Westpac's calculations in the report show that a typical first-home buyer taking a 90 percent home loan on a purchase price of $700,000 would pay just over $3900 a month on a home loan rate of 5.59 percent.
Rates have dropped further from that level.
When rates were 7.6 percent, at the peak of the cycle, the loan would have cost $4697 a month or $794 more.
Buyers in Auckland are at least $1024 a month better off, in Wellington $840, Christchurch $716 and Queenstown $1256.
It is still more expensive than it was to service a mortgage at the peak of the market, when prices were highest but home loan rates were still lower.
Wellington is the only place where it is cheaper now, at $227 less a month. Cotality chief property economist Kelvin Davidson said that was because it was where first-home buyer prices had fallen the furthest.
He said about 75 percent of first-home buyer purchases at present were standalone houses, compared to 70 percent in 2023.
The median price paid by first-home buyers this year was $700,000, down from $719,000 and a peak of what Davidson said was up to $740,000.
But Westpac's data showed the average age for a first-home buyer is steadily climbing, at 37 in Auckland, 36 in Wellington and 35 in Christchurch.
That was two or three years older than in 2019 and Davidson said it was likely significantly more than in decades past.
The national average age was 36, compared to 34 in 2019.
Westpac economist Satish Ranchhod said the higher prices paid by buyers in Auckland - the median for first-home buyers the city this year is $903,000 - meant it took people longer to save deposits there and interest rates could take up 40 percent of some buyers' income.
Nationwide, the average was 33 percent. More affordable areas like Taranaki and Whanganui only required 20 percent or 25 percent.
Ranchhod said first-home buyers were also now more likely to have children, which affected the size and location of the houses they chose.
Davidson said the recent more sluggish housing market had been "hugely favourable" for first-home buyers because they could take their time to secure a property at a discount.
"It's been a sustained period of relative strength for first-home buyers, the number of deals is going up too.
"It's never easy but house prices are down from their peak, mortgage rates are now falling which has been helping."
Many first-home buyers were able to get lending with smaller deposits, he said, and were using their KiwiSaver funds.
"Renting will still be cheaper in lots of cases but the security of tenure offered by owning a property is still a strong motivation for people."
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