Latest news with #firstHomeBuyers
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.
News.com.au
6 days ago
- Business
- News.com.au
‘Stop giving concessions': Major warning on first-home handouts
Potential first-home buyers are falling further behind due to the very schemes designed to get them into a home. Independent economist Saul Eslake said the best thing the government could do to help first-home buyers would be to remove concessions that allow them to buy a home. 'The question isn't what they should be doing, it's what they should not be doing,' he told NewsWire. 'What they have to stop doing is things that needlessly inflate demand for housing. 'Stop giving out what I call second-home vendor grants as I call them because that is where the money ends up.' 'Stop giving stamp duty concessions, all they do is allow people to pay the vendor what they would have paid to the state government and back away from the mortgage deposit guarantee schemes and shared equity schemes,' he said. Mr Eslake said these policies, which are designed to help first-home buyers, simply end up inflating house prices. 'While a shared equity scheme sounds like a good idea, in practice, if you're willing to buy a $400,000 house and the government says 'hey, we will give you 20 per cent', then buyers say 'oh good, I can now afford a $500,000 house'. 'So a $400,000 house becomes a $500,000 house, so it's more a matter of just stop needlessly inflating demand.' One of the key election policies the Albanese government ran on was its expansion of the First Home Guarantee scheme, which is sometimes called the 5 per cent deposit scheme. This program allows first-home buyers to purchase property with a deposit as little as 5 per cent, with the government effectively guaranteeing the other 15 per cent, allowing first-home buyers to avoid paying lenders' mortgage insurance. But in an updated version of the scheme to come into effect at the start of 2026, caps of $125,000 for singles and $200,000 for couples will be removed. The PropTrack April Home Price Index showed national house prices hit a new record high over the month of April, increasing by 0.2 per cent monthly or 3.7 per cent compared with the same time last year. Helia chief executive and managing director Pauline Blight-Johnston said the main risk to the latest policy was the removal of the income caps to get government help. 'Our belief is that we will achieve the most as an economy if the government help is directed towards those that need it the most, and those that are able to help themselves through private enterprise do so without the taxpayers' dollar,' she told NewsWire. 'At the end of the day, our view is that taxpayers' dollars should go to those that really need the help to get into the market, such as essential workers or others that are really struggling.' Ms Blight-Johnston said expanding the HGS didn't address the fundamental underlying issue for those struggling to buy their first home – a shortage of affordable supply. She fears that the government's housing schemes just worsen housing affordability by fuelling demand and driving up prices. Instead, she pointed to first-home buyers using lenders' mortgage insurance as a 'really powerful tool' that is often misunderstood. 'People think of it as a fee …. But if you think of it differently as a wealth creation tool and it allows you to get into a home earlier, on average people that use LMI get in around nine years earlier and around $100,000 better off after five years because they got into the market earlier,' she said. Ms Blight Johnston said mortgage holders would typically pay 1 to 2 per cent as a premium above their usual repayments if they took on LMI. 'If you think property goes up on average 4 or maybe 5 per cent a year, if it is going to take you more than six months to save the deposit, the extra 15 per cent — as LMI takes the deposit down from 20 to 5 per cent – you're going to be ahead by getting into the market earlier and paying the premium.' Mr Eslake said LMI could increase demand for property if it acted like a reduction in interest rates. 'We know whenever interest rates go down, people borrow more and pay more for the house they buy which results in higher prices,' he said.
Daily Mail
26-05-2025
- Business
- Daily Mail
The two issues that could eventually undo Anthony Albanese's landslide win: PETER VAN ONSELEN on the twin drivers of discontent the PM must address before it's too late
While the Labor government is riding high on its recent electoral thumping of the Liberal Party, there are two issues that could turn Australians against it very quickly. Rising immigration and house prices. While last week's interest rate cut will be welcomed relief for mortgage holders, they are no doubt conscious it's only the second rate cut since the cash rate went up 12 consecutive times since Labor came to power. For Australians yet to get into the housing market, the risk is that prices once again push north. The Reserve Bank has highlighted this as a concern. Labor made a big deal on the campaign trail of its policies to make housing more affordable. If it can't deliver on those promises because prices keep going up, those shut out of the market might feel dudded. Especially if recent record immigration numbers continue. The pre-election budget Treasurer Jim Chalmers handed down forecast slowing rates of immigration in the coming years, but the number of new arrivals remains high. And there are no guarantees the forecasts turn out to be right. With housing already in short supply more demand from overseas will only make it harder for first home buyers to enter the market. It will also put upward pressure on rents. If the global economic downturn that predicated the rate cut also results in worsening economic conditions domestically, unemployment might creep up too. New migrants would be competitive for jobs in such a climate, causing some voters to question whether Labor really has done enough to slow the immigration intake. The economic challenges around cost of living pressures Labor was struggling to deal with before the election campaign became a referendum on Peter Dutton's personal unpopularity haven't gone away. Now that Dutton has, if the Coalition can take its internal problems off the front pages Labor's re-election honeymoon might be cut short by the ongoing economic difficulties most voters continue to face. For the moment political coverage is unlikely to move on from Coalition chaos, but such inside the beltway fascination amongst the Canberra Press Gallery won't much interest the wider public. For a time the problems of the opposition will mask any growing dissatisfaction with the Labor government, such is the nature of the two party horse race. But once that sideshow fades, if Labor hasn't addressed the problems it said it would during the campaign, expect to see a political backlash. Then watch out for complacency from Anthony Albanese, even arrogance in the face of adversity, given that the PM's majority is enormous and his political authority assured. While it's true that the record loss on May 3 probably consigns the opposition to two more terms in the political wilderness, if Labor doesn't live up to expectations over the next three years a sizeable chunk of its majority might be taken away from it all in one go. If that is to happen housing and immigration are the likely drivers of discontent.
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.
Daily Mail
21-05-2025
- Business
- Daily Mail
Why first-time homeowners need to 'get in before the crowd' and buy now
Hopeful home buyers have been urged to pull the trigger now before a first home assistance scheme causes property prices to surge. From January 2026, the federal government will guarantee half the deposit on Australians' first homes, slashing the requisite from 10 per cent to five per cent. A deposit of just $50,000 would be enough to purchase a $1million home. However, industry experts warned the plan will fuel housing stress by opening the door to a flood of demand in a low-supply market. Michael Yardney from Metropole Property Strategists has predicted vendors will react to the scheme by raising house prices - making homes less affordable for future generations of entry-level buyers. 'Property prices will skyrocket in early 2026 when Labor's five per cent deposit scheme comes into effect – get in before the crowd,' he told the West Australian. 'Sure, prices seem expensive but that's what your parents said. Who wouldn't like to buy their parents' home for the price they paid.' Tim Reardon, an economist from the Housing Industry Association, also encouraged first-time buyers to buy now before the scheme takes effect. 'The housing affordability problem will get significantly worse over the next three years as we complete a low volume of homes, and population growth remains extraordinarily high,' he said. Labor's Homes for Australia Plan also promises to shore up renters' rights. The Albanese government has vowed to build 100,000 homes exclusively for first-time buyers to balance demand for property introduced by its deposit scheme. They also believe their $43billion commitment to the housing industry - eight times more than the Coalition invested in a decade - will see the construction of 1.2million homes over the next five years. But critics have repeatedly slammed Labor for slow progress on its plans. According to data released by the Australian Bureau of Statistics in April, over one million homes need to be built by 2029 to keep up with projected demand. Australia needs to build 57,000 homes per quarter between 2024 and 2029. The current rate sits about 20,000 houses below that requirement. It follows a strong period of construction during the pandemic. Experts say growth in the industry has been hampered by labour and materials shortages, which the government has promised they are addressing. Slow planning processes and approvals, and high interest rates have also hindered construction. The number of commenced and finished construction projects were down in 2024 compared to previous quarters.
