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RNZ News
5 days ago
- Business
- RNZ News
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." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
NZ Herald
21-05-2025
- Business
- NZ Herald
First-home buyers are getting into market with less savings, data shows
That's a significant increase from March 2023, when there was just $510m in lending to borrowers with less than 20%, and last March, when there was $584m. 'First-home buyers basically have the monopoly on low-deposit lending allowances at banks,' CoreLogic property economist Kelvin Davidson said. 'Owner-occupiers further up the ladder may not need low-deposit finance as much so that's part of it, but I also think to some extent that the banks have been sort of reserving those speed limits for first-time buyers. 'For quite a while now we've seen about 75% or 80% of all low-deposit lending to owner-occupiers in general has been to first-home buyers. 'About two in every five first-home buyers, or even a bit more than that, are entering with a low deposit.' He said some buyers might not even be aware it was an option. 'Some people might be out there thinking 'gee I don't have the required 20% so I can't buy a house', but actually there are allowances there and a lot of it goes to first-home buyers. 'I think if you want to get into the market with a reduced deposit there probably is capacity - the speed limits overall aren't really being tested. 'The speed limit there is 20% [of new lending] but only about 12% is going out at low deposit … then other tests come into it.' He said KiwiSaver was also helping. In April, 3970 people withdrew their KiwiSaver funds for a first-home purchase, up from 3320 in April 2024, with a total of $167.3m withdrawn. Mortgage adviser Glen McLeod, head of Link Advisory, said borrowers with less than a 20% deposit were able to access interest rates from about 4.99% to 5.59%. 'Those who qualify for a Kāinga Ora First Home Loan can access these same rates with as little as a 5% deposit, though a 0.50% fee applies. Advertise with NZME. 'When the deposit is under 20%, most lenders apply a low equity margin, which is typically tiered based on the loan-to-value ratio. 'These margins vary by lender, but we're starting to see some shift in the market – one major bank has recently removed these margins altogether, offering a standard rate and a discounted rate for borrowers with more than 20% equity.' He said it was noticeable that more applications were including income from boarders. 'Whether it's friends helping with mortgage payments or adult children moving back home, many buyers are looking for ways to improve affordability. 'In some cases, income from secondary dwellings or granny flats is also factored in, where accepted. It's a reflection of how people are adapting to meet lending criteria in a challenging environment.' Adviser with Loan Market Karen Tatterson said a first-home buyer with ASB who had a 10% deposit would pay the advertised interest rate plus a 0.75 low-equity margin. 'As an example, their one-year rate would be 5.7%. 'ANZ, who do not charge a low-equity margin, apply their standard rate so for first-home buyer at 90%, their one-year rate would be 5.59%.' She said all the banks were also offering a $5000 cash contribution for a first-home buyer. Overall, Davidson said the market continued to steadily become more active. Sales were up 4% compared to a year earlier in April, taking activity to 7% above the historical normal for this time of year. 'Sales activity has been on a steady incline, and we're now starting to see this translate into home values,' Davidson said. The Cotality Home Value Index rose 0.3% in April – the fourth consecutive monthly increase – although growth remains modest. Among the main centres, Hamilton and Christchurch led the gains, while Dunedin, Wellington and Tauranga showed flatter results. 'Despite these signs of improvement, the market remains tilted in favour of buyers,' Davidson noted. He said the outlook for the rest of the year was for moderately increasing prices and activity. 'We're expecting a moderate upswing, with national property values forecast to rise around 5% for the year,' he said. 'Lower mortgage rates will be a key driver. But we're also watching the wider economy, the labour market, and the impact of lending restrictions, particularly debt-to-income limits.'
RNZ News
21-05-2025
- Business
- RNZ News
First-home buyers are getting into market with less savings, data shows
Banks can lend 20 percent of their new lending to owner-occupiers with less than 20 percent deposit or equity. Photo: Unsplash/ Artful Homes Forget saving a 20 percent deposit - large numbers of first-home buyers are getting into the market with much smaller levels of savings. Cotality, formerly Corelogic, has released its latest data, which includes Reserve Bank figures showing that 44 percent of all first-home buyers had less than a 20 percent deposit in March and first-home buyers were responsible for 78 percent of all low-deposit borrowing by owner-occupiers. Banks can lend 20 percent of their new lending to owner-occupiers with less than 20 percent deposit or equity. Reserve Bank data shows that in March there was $947m of lending to borrowers in that position, just $24m of which was to investors. That's a significant increase from March 2023, when there was just $510m in lending to borrowers with less than 20 percent, and last March, when there was $584m. "First-home buyers basically have the monopoly on low-deposit lending allowances at banks," Corelogic property economist Kelvin Davidson said. "Owner-occupiers further up the ladder may not need low-deposit finance as much so that's part of it, but I also think to some extent that the banks have been sort of reserving those speed limits for first-time buyers. "For quite a while now we've seen about 75 percent or 80 percent of all low-deposit lending to owner-occupiers in general has been to first-home buyers. "About two in every five first-home buyers, or even a bit more than that, are entering with a low deposit." Corelogic property economist Kelvin Davidson. Photo: SUPPLIED He said some buyers might not even be aware it was an option. "Some people might be out there thinking 'gee I don't have the required 20 percent so I can't buy a house', but actually there are allowances there and a lot of it goes to first-home buyers. "I think if you want to get into the market with a reduced deposit there probably is capacity - the speed limits overall aren't really being tested. "The speed limit there is 20 percent [of new lending] but only about 12 percent is going out at low deposit… then other tests come into it." He said KiwiSaver was also helping. In April, 3970 people withdrew their KiwiSaver funds for a first-home purchase, up from 3320 in April 2024, with a total of $167.3m withdrawn. Mortgage adviser Glen McLeod, head of Link Advisory, said borrowers with less than a 20 percent deposit were able to access interest rates from about 4.99 percent to 5.59 percent. "Those who qualify for a Kāinga Ora First Home Loan can access these same rates with as little as a 5 percent deposit, though a 0.50 percent fee applies. "When the deposit is under 20 percent, most lenders apply a low equity margin, which is typically tiered based on the loan-to-value ratio. "These margins vary by lender, but we're starting to see some shift in the market - one major bank has recently removed these margins altogether, offering a standard rate and a discounted rate for borrowers with more than 20 percent equity." He said it was noticeable that more applications were including income from boarders. "Whether it's friends helping with mortgage payments or adult children moving back home, many buyers are looking for ways to improve affordability. "In some cases, income from secondary dwellings or granny flats is also factored in, where accepted. It's a reflection of how people are adapting to meet lending criteria in a challenging environment." Adviser with Loan Market Karen Tatterson said a first-home buyer with ASB who had a 10 percent deposit would pay the advertised interest rate plus a 0.75 low-equity margin. "As an example, their one-year rate would be 5.7 percent. "ANZ, who do not charge a low-equity margin, apply their standard rate so for first-home buyer at 90 percent, their one-year rate would be 5.59 percent." She said all the banks were also offering $5000 cash contribution for a first-home buyer. Overall, Davidson said the market continued to steadily become more active. Sales were up 4 percent compared to a year earlier in April, taking activity to 7 percent above the historical normal for this time of year. "Sales activity has been on a steady incline, and we're now starting to see this translate into home values," Davidson said. The Cotality Home Value Index rose 0.3 percent in April - the fourth consecutive monthly increase - although growth remains modest. Among the main centres, Hamilton and Christchurch led the gains, while Dunedin, Wellington and Tauranga showed flatter results. "Despite these signs of improvement, the market remains tilted in favour of buyers," Davidson noted. He said the outlook for the rest of the year was for moderately increasing prices and activity. "We're expecting a moderate upswing, with national property values forecast to rise around 5 percent for the year," he said. "Lower mortgage rates will be a key driver. But we're also watching the wider economy, the labour market, and the impact of lending restrictions, particularly debt-to-income limits." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
The Spinoff
20-05-2025
- Business
- The Spinoff
Housing market in holding pattern as budget day looms
With a number of policies already in place, the government looks set to give housing short shrift on Thursday – though speculation continues about an end to the foreign buyer ban, writes Catherine McGregor in today's extract from The Bulletin. Budget unlikely to deliver new housing spend With Budget 2025 set to be unveiled tomorrow, economists are warning not to expect a major new push on housing. 'They are already looking at the housing market in lots of other ways,' said Kelvin Davidson, chief economist at Cotality (formerly CoreLogic), pointing to a suite of supply-side initiatives such as the Going for Housing Growth programme, self-certification for builders and RMA reform. In the meantime, the housing market remains relatively subdued – a cooling that has opened up opportunities for first-home buyers. Speaking to OneRoof's Catherine Masters, Brad Olsen of Infometrics noted that tight fiscal settings mean any additional housing spend would likely be 'tinkering around the sides'. Davidson echoed the sentiment: 'The market's functioning OK.' Foreign buyer ban in the spotlight While housing may be absent from the budget's main stage, speculation continues to swirl around one politically charged topic: the potential lifting of New Zealand's foreign buyer ban. Introduced in 2018 under Labour, the ban prevents most overseas buyers from purchasing residential property, with exceptions only for Australians and Singaporeans. Now, agents in the luxury market are hoping budget day brings a change, with some even claiming they've heard from politicians that a reversal is imminent, OneRoof's Masters reports – though Act's David Seymour said 'there is no decision I'm aware of'. Still, pressure is mounting, particularly with the surge in applications under the revamped golden visa programme. US publication Bloomberg News (paywalled) quotes one agent reporting a 'tremendous amount of pent up demand' from wealthy Americans eyeing New Zealand as a haven. Many of them are already paying premium prices – up to $30,000 a week – to rent luxury properties here, reports RNZ's Rachel Helyer Donaldson. The surge in high-end rentals is the result of an emerging 'try-before-you-buy' strategy among clients awaiting clarity on the foreign buyer rules, an agent said. Renters told they have power – but do they? Outside of the luxury enclaves, the current rental market is described by many as a 'renter's market', with national rental listings at a 10-year high and landlords reportedly offering incentives such as a free week's rent or grocery vouchers. But the idea that tenants have their pick of great properties is far from the full story, writes Gabi Lardies in The Spinoff this morning. Tenants 'are in no position of power at all', said Angela Maynard of the Tenants Protection Association, citing the reinstatement of 90-day no-cause evictions as a major rollback of renter rights. Laura Drew of Community Law Wellington added that while rent increases may be slowing, poor-quality housing and a power imbalance remain entrenched. The term 'renter's market', she suggested, offers little comfort to those stuck in unsafe housing or locked into unaffordable fixed-term leases. Market hamstrung by planning and code constraints, says developer Even as the government touts its deregulatory reforms, many in the building sector argue that core structural issues remain unaddressed. The most high-profile critic is Ockham Residential co-founder Mark Todd, who just gave a fascinating interview to OneRoof's Diana Clement about why our planning rules continue to stifle the development of high-quality, high-density housing in New Zealand. It's not the RMA holding things back, but the Building Code, Todd argued. The code is 'an absolute regulation clusterfuck', he said – but most property developers like it that way. 'The Building Code as it is suits them, because they have no interest in building quality compact cities – they're in thrall to sprawl – and making the RMA a false bogeyman suits them too.'
Scoop
17-05-2025
- Business
- Scoop
Is It Actually A Good Time To Buy A House?
Article – RNZ Twice this week, first-home buyers have been told it might be their big chance to get into the market. , Money Correspondent Twice this week, first-home buyers have been told that now might be their big chance to get into the housing market. First, QV said a lull in property values was giving first-time buyers a 'rare opportunity'. Then, the Real Estate Institute acting chief executive Rowan Dixon suggested that, if first-home buyers were looking for a chance to get into the property market, it was a good time to do so. 'There is still plenty of stock there, particularly in the main centres, good pricing and low interest rates… if people can get into the market for their first home now is a good time to do it before maybe things start to pick up a bit more.' But just how great an opportunity is it, really? RNZ looked at a number of factors that could help answer that question. Interest rates Interest rates have fallen significantly, which helps to make the prospect of servicing a mortgage a bit more palatable. From a peak of about 7 percent, two-year home loan fixes are now about 5 percent. That means, for a typical first home mortgage of $567,448, the weekly repayment would be about $700. That's still about $60 more than the national average rental rate. Usually, falling interest rates push up house prices but that hasn't happened to a significant degree yet. 'There's a window where financing is cheaper but it hasn't quite flowed through to house prices as it might have done historically,' Corelogic chief property economist Kelvin Davidson said. Brad Olsen, chief executive at Infometrics, said rates were not expected to get back to the 2 percent levels seen through the Covid times. 'Interest rates are down but to more usual long-term levels.' House prices Nationally, house prices are still down about 15 percent from the peak, although they are still up 4 percent a year compared to five years ago. Wellington's prices are furthest from the peak, still down more than 25 percent, Auckland's are down 21.6 percent. But all prices are still higher than five years ago. Earlier data from Corelogic showed they were the areas that had the largest affordability improvements, bringing them close to long-term averages. Places like Queenstown and Christchurch are a bit of an outlier – Canterbury is now just 3.2 percent below the peak and Southland has already exceeded it 'Houses are more affordable than they were,' Davidson said. 'I still wouldn't say they are affordable as such – they're cheaper, but not necessarily cheap. But are house prices really going to fall significantly further from here? It seems unlikely. They'll probably turn around and rise a bit. There's a sense now that they're as cheap as they're going to be even if they're not necessarily cheap.' KiwiSaver Some buyers' KiwiSaver accounts may have taken a hit through the start of this year due to market volatility. Most of those could have shown signs of recovery over the past week. Davidson said it was likely that people who were planning to buy in the near term had already shifted their money to conservative funds before the wobbles hit. Stock on the market Buyers have a lot of choice at the moment, which gives them the upper hand. In a buyers' market, they can take their time over their decisions and know they have a lot of options. says the amount of stock for sale was up 6.2 percent year-on-year in April. Olsen said that meant buyers could bargain for a lower price and play sellers off against each other. 'If you want to get a sale and a possible buyer knows there is probably another house for sale down the road you'll be doing a fair bit to make sure your house gets sold.' Rent But it's actually a good time to be a renter, too. There is also a lot of rental stock on the market in lots of parts of the country, and advertised rents are dropping. The picture isn't consistent across the entire country but it's taking longer than normal to rent in most places with the exception of parts of Canterbury and Hawke's Bay. 'You could make a case of why rush into it when you could get a good deal on a rental for a while and you're probably not going to get left behind by the housing market in the meantime,' Davidson said. 'In general terms renting is always cheaper than buying so nothing has really changed there… if you stuck to that line of argument no one would ever buy a house.' The job market Buying a house usually means you need to have reliable income. While the worst might be nearly over for the labour market, it's likely to be weak for a while to come, which could mean job losses are more likely and it could be harder to find a new job if you are unemployed. Anyone who is worried about their job security might hesitate about buying a house. 'They might be able to afford the house at the moment but not if they lost their job and couldn't find a new one,' Olsen said. The other stuff Davidson said you could argue that it's 'always a good time to be a first-home buyer'. 'In the sense that if you want to buy a house, like the house, like the location, you're secure in your job and you want security of tenure and you can secure the finance, you're going to be there for the long-term why wait?' He said for many first-home buyers the decision was more than financial. 'They're setting up a family base.' He said if people looked for negatives they would probably never do anything. 'There are always pros and cons but if we're asking a binary question, is it a good time to buy, yes or no, I would have to say yes.' Olsen said he was always worried when people said buyers should 'rush in'. 'It comes across as scarcity marketing to scare people into rushing into buying. Buyers definitely have a good opportunity at the moment, that is true. But I think they should keep their wits about them, look at what's out there and how much they can afford, run some scenarios on what they could afford if things changed around mortgage rates or their job.'
