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Latest figures from the Reserve Bank confirm the massive surge in house prices toward the end of last year saw buyers stretch themselves much further financially

Latest figures from the Reserve Bank confirm the massive surge in house prices toward the end of last year saw buyers stretch themselves much further financially

Debt to income ratios of those buying houses at the end of 2020 blew out enormously, a crunch of the latest Reserve Bank figures on residential mortgage lending by debt-to-income ratio (DTI) shows.

In Auckland, as at the end of last year, nearly two-thirds of the amount of money borrowed by first home buyers (FHBs) was on a DTI of five times or more.

Even the figures for other owner-occupiers in Auckland were getting stratospheric, with 57.2% of the money borrowed in December at a DTI of five times or more.

The RBNZ tallies the figures monthly, but issues them quarterly. 

The latest figures, up to December, have been delayed by the data breach problem suffered by the RBNZ over Christmas.

While what you might regard as a 'high' DTI is subjective, the RBNZ monitors closely borrowing that is five times or more annual income.

And of course the RBNZ is set to report back to Finance Minister Grant Robertson in May with recommendations over the possible inclusion in the RBNZ's 'macro-prudential toolkit' of a measure to limit DTIs.

To this point Robertson has favoured introducing such a measure for investors and has not wanted to put such limits on FHBs.

The RBNZ has pushed for a general application of DTIs - and these new figures would tend to indicate why. The FHBs are getting very geared.

As mentioned, these figures are produced quarterly, but in the interests of simplicity I have focused on the December figures and compared them with the September 2020 figures and also the December 2019 figures.

In December, on a nationwide basis, first home buyers borrowed $1.691 billion. Of this, some $825 million - just under half of the total - was borrowed on DTIs of five or above. That's a very sharp rise since September.

In terms of Auckland FHBs, it's much worse. They borrowed $753 million, and $488 million of that was borrowed on DTIs of five and above.

Other owner-occupiers generally don't have to stretch themselves as far. But in the Auckland market that's now starting to not become the case - owner-occupiers in the country's biggest city are getting stretched too.

In December the Auckland owner-occupiers (not including FHBs) borrowed $1.531 billion. Of this, well over half - at $875 million - was borrowed at DTIs over five.

The table below shows the percentage of new mortgage money with debt-to-income ratios of over five times:

Group Dec 20 Sep 20 Dec 19
FHBs nationwide 48.8% 43.3% 39.3%
Auck FHBs 64.8% 57.5% 55.3%
Non-Auck FHBs 35.9% 32.3% 26.9%
Other owner/occ nationwide 42.8% 37.7% 30.7%
Auck other owner/occ  57.2% 49.0% 46.9%
Non-Auck other owner/occ 31.5% 30.3% 24.1%

As can be seen all of the figures have blown out substantially in the three months from September to December. It can only be imagined that has continued.

Figures such as these would suggest that the introduction of DTI limits might be inevitable. The key question will be whether they will apply to FHBs.

On financial stability grounds alone, these figures would suggest DTI limits should apply to FHBs. But the Government would probably find that unpalatable.

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Lucky if average Kiwi finds a home in Auckland by borrowing 5 time annual salary.

If minimum wage us $20 and assume average earning by a couple is $25 per hour x 2 ( one may be on $20 and another $30) so will be earning $104000 per year and if they want to buy a house in Auckland with median price of 1.1 million with 20% deposit will need $880000 to borrow, which will be approx 8.5 times DTI.

For 5 time ( which too is considered High) they can borrow $520000 and with deposit of 20% could buy near around $780000. Here so as the advise to FHB do not think but just buy any pigeon hole that fits.


While you do not specifically mention FHB I think it is wrong that FHB have an expectation of buying for median price. What is wrong with first home buyers getting on the housing ladder on the bottom rung and not halfway up. This will reduce Dti ratio.


I'd agree in the days where the average first home buyer was younger. Buy that first home that's a bit cold, draughty or too small or needs some work.

But the average first home buyer is now in mid 30's. The age people are starting families. As a result you don't have the same leeway to buy a small starter house.

What a bad attempt at spinning! Just be honest and say you want a 50% discount on a million dollar home.

You conveniently left out the average age for child bearing was 26.7 in the 70s and the average age for first home buyers then was 25.

As usual your comments are all form and no substances.


Yes, and now the average age for childbearing is 30, and first home buying 34. So it isnt 'spin' to say there was more leeway back then - its a fact.

And that's a problem FHBs today created for themselves- they want to marry late and have the kids first.

It's all about priorities and personal decisions- no one else is responsible for your take on life.

That said, there's absolutely nothing wrong renting for life and having a happy family at the same time.

Well, it could be down to the fact that for some reason now most people simply prefer to have kids first and then buy a home. But don't you think it could also be because buying a home before you have kids is more difficult nowadays, for a host of reasons? For example: house prices are a lot higher compared to household incomes, and household incomes are now more likely to be based on two full-time earners rather than one, so the deposit requirements are a lot higher and harder to meet. Most high paying jobs require more education than they used to (for example being a registered teacher used to require a one year training course, now it is three), so people start their working lives later. More people have student loans, so they start their working life with an extra debt burden. Our major cities are particularly unaffordable, so if you need family support to help with childcare before you can access subsidized ECE or school, moving away from those cities (if that's where your family live) is likely to increase your childcare costs, given that it is likely that both parents need to work in order to pay the mortgage. But I guess it could just be that people nowadays 'want' to have kids while they are sill renting...

. . . you forgot student loans.

P.S. Not correct re teacher training being only "one year now three years":
- "one year" was only ever for post graduate (especially secondary) with a three plus year degree and no different, still three plus one year.
- primary teaching was always 3 years COE / University never one year.

Nope, student loans is in there.
Also, pretty sure it's not the case about high school teachers at least (though you're right about primary - at least after about 1966). I've know people who are high school teachers who trained back when you were not required to have a degree to be certified as a teacher. Te Ara also backs this up:

"Teachers enter the post-primary service in one of three ways: first, three, four, or five years' full-time academic study at a university and (usually) one year at a teachers' college for professional training; secondly, one or two years at a teachers' college studying to become a teacher of such subjects as homecraft, commerce, mathematics and science, woodwork, or metalwork followed (except for the courses in the last two subjects) by a probationary year in a school.."

What sucks for those people nowadays is that the payscale is partly based on qualifications, so if you don't have a degree it's harder to progress up the scale (even though you might have decades of experience).

Apologies re student loans.
You are correct re trade teachers - such as "homecraft, woodwork and metal work but were usually required to have a trade qualification.
Early in my adulthood (1970 - 50 years ago) I was a secondary teacher and the vast majority - including science and maths teachers - were one year post graduate.
My ex was a primary teacher and that was three years albeit they could enter having UE from the sixth form.
Yes, while a university degree was not necessary 50 years ago, for the past fifty years three to four years tertiary study was required for the vast majority of teachers. To say that there is considerable increase from one year to four years is stretching it a bit.
Yes, those without what I think was called Q3 qualifications (i.e. full degree) in secondary teaching started at a far lower rate and had a salary step limit and many were frustrated by that.
Been out of touch for quite some many years but listening to a teacher not "fully qualified" is that from about the early 2000s they required those teachers without degrees to complete further study to Q3 level. She was saying that those with only Q2 (2/3 degree) have not been well supported by PPTA in recent salary negotiations.
Agree though; amazing - and frustrating for those it affects - 35 to 40 years teaching experience, probably having raised their own kids, and 35 to 40 years of life experience doesn't count as much as a year's university study by a pimply-faced 22 year old yet considerably affects salary ($10,000pa?).

Just tried checking PPTA salary scales - max for someone with 2/3 degree is $70,000, someone with degree $79,413? or $84,450?

My impression is that teaching in the 70s produced better results than currently so is it a coincidence that a degree has created teachers with lot of knowledge which some of is useless from a practical aspect and that common sense is no longer present in much of today's world?

Sigh, once again you make yourself look foolish. As Al123 pointed out the average age for first home buyers is now 4 years LATER than average age for having kids. Unlike previous generations when buying a house was more likely to happen first ... So yes, FHB buyers now are more likely to have to purchase a first home that is immediately suitable for a family.

I'm not sure what point you are trying to make about marrying later, as if that has anything to do with when they become home owners?

It's just a poorly executed troll account by now, I'm sure of it.

Gotta be. No one could be that ignorant, surely.

Then why assume that one of the couple only earns minimum wage? With 10+ years work experience they should earn more than that.

You assume that experience is automatically valuable, I know a 10 years experienced machine operator who pulls a handle and presses a button when the lights change colour but 10 years experience adds nothing to the value.

If all you do all day is to pull a handle and press a button, then sorry to be blunt but you shouldn't expect to be able to buy an Auckland house.

Serious question - why not? I understand that you shoudn't expect to in the current market, but people who did factory jobs like that used to be able to buy houses, even in Auckland, even with kids, and even when that was the only wage coming in (my Grandfather was exactly such a person). Why shouldn't we aim to create a society in which you don't have to be a high-flyer to have a decent life?

The NZ of the past isn't coming back.

Our historical wealth was based on exports of primary products through protected trade relationships, but we were almost bankrupted as a country when those relationships broke down.

The world is a competitive place. With NZ's relaxed attitude and generally poor education results in STEM subjects we're struggling to keep up as it is.

Women in the workforce (a good thing) means more household income chasing limited resources, but the days of the sole breadwinner are gone, unless on a high income.

Improved technology and automation means there's less value in basic manual jobs. Without subsidies we can't protect those jobs as the competition from overseas is fierce.

Finally, you can have a decent life without buying a house in Auckland.

But most of that is just an explanation of why you think it won't happen - not about why you think it shouldn't.

"there's absolutely nothing wrong renting for life" Only if renting for life is a free choice, actively made. These days most people are trapped into renting because rents are so high they cannot afford to save for the required deposit. the whole point to these property discussion is the cost to everyone.

Just last week one commenter on this site lamented the "hate the landlord" bias and cited his elderly parents who bought an investment property 25+ years before to support their retirement. What he failed to consider was that having bought the property that long ago, then the current market rents could not be even remotely justified on the basis of costs, plus the property should be mortgage free, so his parents could/should have only been charging an affordable rent of around $150 - $200 per week. But no, they were creaming it with 'market rents'.

The whole thing about buying an investment property that people seem to ignore, is no matter if it is one or 100, it is a business decision, and costs v returns should be calculated. The current situation indicates quite strongly that most investor buyers are heavily banking on capital gains, which also suggests that they are wilfully blind to the increasing pressure on the Government to put a stop to the capital gains, meaning that at the end of the day, no matter what they say, their loses will be self inflicted.

Rent increases largely follow asset/goods/tax inflation so on your argument we should all exist on no inflationary changes in price, as a pilot I suggest Govt local & National review their salaries on a like basis and repay the excess they have stolen off their tax & ratepayers.

No one would be talking about rent if it had followed inflation.

How much does 'bottom of the ladder' cost in Auckland? The bottom is where mid/high should be...

Their is no bottom of the ladder now in Auckland and corret if any bottom is, it is where mid/high use to be.

Thanks Jacinda Arden and her chief advsior Mr Robertson for not acting on time. Even now are playing with the time or passing it to Mr Orr and if nothing doing than will announce a date to announce another date for another announcement.

Less said the better for both of them.

is the ladder wooden that goes up a wall, built out of hickory and extends two stories in fires...

or aluminium and used for crossing crevasses when on a glaciers...

im just asking

everyone talks about the ladder but im just wondering which type it is...

before i get on

As ever, nonsense.
Where do you get your ideas about what FHB 'expect'?
As ever, anything to avoid admitting that our economic future is being sabotaged by a generation of graspers who will happily turn the country into Brazil to beef up their retirement fund.

What about their tax? The DTIs should be after tax to make sense. Otherwise their income will be a 1/4 less and the real DTI will be higher

You're right. Worse when you consider a lot of countries allow earners to deduct a portion of their annual housing costs (housing allowance) against their taxable income under certain conditions.

Its been quite a few years since I worked in banking, but as I remember lenders work in debt servicing ratios rather than debt to income ratios. Theres a subtle difference. Debt to income suggests there is a maximum ratio banks will lend relative to household income, whereas debt servicing actually looks at how much income is available to service total debt. This very much depends on peoples income sources and the structure and magnitude of their expenses. In short it could be very difficult to come up with debt servicing limits that are fair to all as financial circumstances can vary widely. A more measured rule would be to stop interest only lending for residential property then all are equally treated, and leveraged speculation is limited.

Yes, this is exactly what they do. They make broad assumptions on income classes, how much certain things cost, like insurance on cars, childcare costs, your lifestyle costs at certain ages etc. That's why they ask you age/number of cars/number and age of children etc. Then they add in certain risk factors/safety buffers. This is partly what the banks compete on to gain market share, if one bank is really close to lending, but doesn't because it's over-estimated the costs of one thing compared to another, they lose business. Hence they try to get this as accurate as possible, it is literally down to $ every year.

Plus they track how they are going, what they are saying no to and how close those people are to the line. I actually set this up for a bank as their front line lending tool. Yes, it was a "computer says no" tool, however they can always ask for special treatment in any special cases.

And the first quarter of this year will be much higher as well.


Really hoping RBNZ brings in Dti for specuvestors, and kills interest only. Vulture fund ready and building daily.


Wont you then become a Specuvestor?

Yield math that pays tax is not cap gain focused tax avoidance. Music slowing fast with no chairs free, what to do....

and for FHB and owner occupiers as well right? Why would you want to protect Investors only from over leveraging themselves and leave FHB's to hang themselves ?


Interest only should not be available for property. Whether you are an investor, FHB or owner occupier. If you can’t pay your debt down that means you can’t afford if.


There needs to be some nuance to it though. For example, when a FHB uses their parent's property as security they will have the larger loan on interest only for a period while the smaller loan against the parent's property is on P&I to allow them to pay it off first.

It's also common for new builds, which may take 1-2 years. IO can enable people to stay in their existing home while waiting for the new home to be built.

Inflation erodes the debt. Interest only loans buy that time. If you can pay the interest you CAN afford the debt.

Based on actual results of Govt intervention (Both Parties) the less Govts do the better things run, notice how little bad happens when Parliament is not sitting.

TTP and some commenters here, won't like it - govt & RBNZ knew that DTI has been repel from 2013, most of their recent puff, it's related to mental hot air scare mongering. NZ housing is already beaten the rest of OECDs on the planet, this is a sure sign of progress. The talk of Health response is severely incorrect, it's merely a border closure=security response - Health? just open the news the past week, all those young Health professional are all in drove to be across the ditch, really more prudence governance in term of Banking, Housing, Grocery, Wages etc. - NZ in fact has shown the world, that no matter what in the future? when facing the 'potential dire situations' the 'Wealth response'/printing money/subsidy must start at the level of beyond 'double, triple' it must be on the level of 'quad' - it's a bit like, about to get headache? here take all this 16 Panadol extra at once, .. keep doing the same/amplify the belief on it until.. - C'mon, every one knew that removal of LVR is nothing to do with Health response, even those massive QEs? none directed for Health.. all towards 'Wealth'.. or sustaining the most important .. phantom in NZ society.. the OZ Banks.

May as well just include Wellington now as a separate category since most houses here are now worth over 1 million.

High house prices are a result of productivity overvaluation and the former balances that equation.

Applying DTI to FHBs impedes them from owning their own houses and doesn't solve overvalued wages.


Apply it to all and watch it all come crumbling down when no-one can borrow. Wouldn't be the worst result.


Overvalued wages?? Try absurdly low interest rates instead and you might get closer to the truth.
DTI impedes people from taking on huge debt levels without regard for their earning capacity and future economic conditions - which could include another financial crisis and mass unemployment.

Well, the other solutions are either to give them mortgages so they live a life of mortgage slavery or falling house prices. The former is unacceptable by first world country's standards, the latter is as feasible as banning all types of speculative behaviour as a short term solution in the demand side plus increasing supply over the next few years.


The more income and wages we plough into property, the less there will be to go around the rest of the economy.
We are killing that wider economy by doing so.
It's not as if the debt amount stands still. If it did, wage rises (what there are of them) and lower interest rates might provide more liquidity to the system.
But as these figures show, we capitalise - tie up, in other words - any extra cent of income into one income capturing market.
At some stage we will be able to own property and eat - that's it.
And the eating bit is going to be put under severe pressure at some stage soon.

Given the stars given by ASB recently - I think a large part of the population are already at that point. Rent and food + accommodation supplement to survive.

Maybe they should bring in broad based DTI's and even include FHBs to ensure financial system stability. Then to make it affordable (and give an even bigger middle finger to investors), the government could make interest costs tax deductible for say the first 5 years of the FHBs mortgage. Might be a double winner for their base...


Bringing DTI for FHB will be a blessing in disguise as may prevent them to borrow beyond under FOMO and repent afterwards but yes just like LVR, can have two benchmark, one for FHB and another for investor and can also link it to the percentage of deposit to protect the system.

More than DTI, current situation demands ban on interest only loan, which for some reason both government and RBNZ are hesitant as may be they too know that the party will stop and they actually not in favour of stopping the ponzi and are trying to put up a performance to potray that they care, where's reality is otherwise.

Yep, although remember IO loans have their place, particularly when adding to new supply. A ban on existing housing makes sense, but not if you are becoming a developer where money is needed up front and you will sell land and the house once developed to pay off the loan. In these cases they don't have the cash flow to pay P&I loans and it takes 1-5 years to create the development.

Remember to not shoot ourselves in the foot when demanding such changes!

Good call I/O available for new builds only. Someone call Jacinda!

Only for this if developers have to sell at certain prices. Most just trying to profit off the ponzi

Very true. Its the use of perpetual IO loans on cashflow neutral rentals that worries me. It's a business model that only stacks up if prices and rents are rising or interest rates are falling. We are hitting the limits on all three of those metrics.

Your suggestion probably offends the human rights legislation of nonediscrimination but Labour/Greens are already doing this which sets a useful precedent for when I become El Pressidente and start implementing some very interesting legislation as part of the truth and revenge commission.


Damien Grants latest column in stuff is just astonishing. Apparently young people who have worked hard to get a good job and aspire to own a home are 'middle class moaners' whose desire to not be lifetime renters is just as frivolous as the desire to own a fancy car. Older people who own multiple properties however are kiwi battlers just trying to provide for their own retirement. Apparently making a middle class salary by working for it makes you wealthy and therefore undeserving, but owning multiple assets which earn you more than a middle class salary (tax free!) each year makes you hard working and deserving of protection.

Nah, you lost the context. It's actually a well balanced article.


What 'context' is that?
To give you some context: if we care about middle New Zealanders being able to have a decent retirement - well, the cornerstone of being financially ok in retirement is owning your own home. Home ownership rates - especially amongst under-40s - hsve been dropping like a stone. So its pretty clear that ensuring more of middle NZ can own their own home is more important than protecting the interests of those with multiple properties if what we care about is people not living in poverty in retirement.

If a retired couple with a freehold home can live comfortably on approx$1300-state super - a month then a young couple earning $80-100K should have no trouble in saving for a deposit.Just cut out flash cars/clothes and entertainment - like us boomers did or is that too hard. Everything Millenials etc have was created by my & my parents generations, so far millenials claim to fame seems to be Faces##t and Twatter plus a Phd in whingeing.

Much the same as investors just need to cut out the flat whites, Sky telly and eating out all the time and they'll have no problem with paying their taxes rather than evading them by pretending they didn't buy for capital gains. Just cut out flash cars/clothes and entertainment.

Fancy getting free education / job training, cheap housing inherited from the post-war generations, generous benefits, non-means-tested pension, then putting up costs of everything for following generations while proclaiming "We did it all on our own two feet with nothing from anyone!" when whinging on talkback.

Who'd be so completely lacking in self-awareness?

Don’t forget muldoons rent controls

It was a truly jaw-dropping piece of mental gymnastics to justify his opinions.


If DTI's are introduced they have to be applied to all, why protect Investors and not FHB's?

Agree. Prices need to come down across the board.

Prices need to come down ? DTI is not about prices it's about preventing the buyers to over leverage themselves

Agreed, let's do it for all... including the FHB - afraid prices to coming down? it's just scare mongering reading the Ireland experience.
NZ is fully duffrunt! - vaccine are around now, NZ pricing will be buffered by the next wave of easy overseas $ seek shelter here, CCP sponsored banks already here, soon will use larger base customers eg. via W/Pac, the rest will envy then do the same, the more the merrier they said.
Remember, when there's a will there's away.. you can put CGT even.. but once the govt+RBNZ said NZ should not experience the natural correction, anything will be done to it artificially.. re-float the sank ship/price. Even to the level of announcing to the world that the ship is floated, despite already at the bottom sea. It's really mimicking the past govt Tulips promo effort, except now NZ is in BTC steroid housing territory.

Aka preventing buyers paying current prices.

c'mon Yvil, seriously!

We all know that alot of so called PIs are leveraged across multiple properties and often with a very small income relative to the overall value of the portfolio. however when the properties are sold the capital gain brings home the bacon.

So if prices fall 20% this can have a huge impact on the business model of that PI, but for a FHB as long as they can pay their mortgage no problem.

I actually think all property purchases should be subject to DTI fundamentally because it aligns housing to wages and future proofs financial disasters. the way the Ponzi is going at the moment, in 5 years it could end that DTI is 20x income. Nobody wants that.

If the govt chooses to do DTI to just PIs at this point, at least its a good start

To quote the RBNZ

International evidence suggests that highly-leveraged investors - particularly ‘late stage’ entrants to the property market - play an outsize role in both the ‘boom’ and ‘bust’ phases of housing market cycles.

Because investors price out fthb.

Because investors are more like to chase cap gains / speculative. Rather than more natural growth.

Because home ownership rates are dropping, along with things that flow from this like reproduction rates (seriously we are not even replacing our population anymore, hence all the Chinese).

I could keep going

This is the second worrying stat I heard today. This morning on the radio Stats NZ declared that on average each NZer saves a little over $400 per annum. If you couple that with the incidence of DTI ratio greater than 5 described here then there are some very vulnerable home owners out there. Rising OCR over the next 18 months is predicted. Couple that with a limited capacity to save and negative equity likely if a sharp correction occurs for those purchasers with low deposits in 2020. I hope GR has a delicate hand on the tiller while we navigate a much needed market correction.

To add to the theme... in the last week or so I've seen or been sent notice of the following... coffee going up (had to prioritize my personal obsession), roadside recycling going up, hairdressers having to raise prices, container hire going up (40%+ international shipping and other costs up), diesel up, feijoas in season $10kg... wtf!, lots of different building materials up, doctors fees up... the list goes on.

Then there are the noticeable instances of items being reduced for the same previous price. Ever seen that anchovies get packed around the outside of the jar with the centre completely hollow?

Seems like inflation's coming.

"As mentioned, these figures are produced quarterly, but in the interests of simplicity I have focused on the December figures". Have no problem with this but feel either David Hargreaves or Jenée Tibshraeny are not asking RBNZ enough questions specifically around the data breach and what reports have not been forthcoming since the data breach. If this is somewhere I've missed it. Since it takes 2-3 weeks for the 1/4rtly figures to come out, RBNZ should be asked what 1/4 qrtly reports will not be produced because of the data breach. This is getting to crunch time as i think mortgage deferrals are ending today. Have not read a hint of them being extended.

Is that household income?

Despite the recent announcements, FHB still currently face considerable quandaries:
- What is the market going to continue to do?
- Buying is going to involve a considerable debt, and
- What is likely to happen to interest rates in the medium term?
As I have previously posted, short term fluctuations in the market are uncertain, however there is still some risk - albeit small - of some price increase and even a Jacinda's conservative 2 or 3% that is $20,000 pa on a $800,000 entry property. However, is $20,000 (after tax income) increase just swimming against the tide and worth taking a risk of holding off.
A $800,000 property with a 20%, $160,000 deposit, is a mortgage of $640,000. The size of that debt to income is daunting and something previous generations have not experienced - and even when interest rates were a conservative 8% the size of that sort of loan doesn't equate.
And just what is going to happen to mortgage rates; the outlook is that we may have reached the bottom so there more likelihood of upside of increasing interest rates and mortgage payments rather than the situation experienced over the past decade.
The 19809s Rogernomics economic reset has brought increasing disparity and it is now reaching a point where so many cultural norms are being lost: homeownership, homelessness, poverty especially child poverty, and a whole raft of increasing social issues.
The recent announcements, although necessary, are just simply easy tinkering - and I also put the minimum wage increase in that category - with no signs of considered transitional thinking in response to a much needed economic reset.
There comes a point when tinkering achieves nothing and I think that we have reached that point as the FHB quandaries illustrate.

Won't banks just create longer mortgages to counteract higher prices. eg 30 or 40 year mortgages? If retirement goes up to 70+, then 40 year mortgages may become more common. The sooner that banks can get people signed up to a house, the better for banks.
I wouldn't be surprised if that was one reason why National wanted the super age to rise, so that banks could then lend for longer as people needed to work for longer.

Slightly off topic borrowing question... Any bankers out there?
Have a 150k mortgage on a 1 mill property, salary is only slightly less than my borrowings, relatively young with a potential (but hopefully not) lifetime of repayments in front of me.
Had a decent revolving facility to cover day to day surprises, but recently fixed the 150 on the 5 year rate for 5 years, leaving not much revolving which makes me a bit uncomfortable as sole salary supporting a family of three (possibly becoming four in the next year).
Kiwibank won't extend credit unless I show the quote for work to be done on the house. I'm not a dishonest person, is this just the go at the moment everywhere?
I'm not saying it's wrong, it's actually a good thing in many respects. I just missed the advice note before I fixed my repayments for 5 years.

I'm sure banks are all tightening up on revolving credit facilities to reduce risk, they can even remove existing facilities if they want without warning! It would be interesting to see what would happen if RBNZ restrict I/O loans...

I did not realise they could remove revolving credit at whim. Very interesting!

Ive heard that they also can, in theory, take money out of your bank accounts to pay your mortgage without asking you. (Thats why i decided not to offset my emergency savings and instead keep them at a different bank).

Ok more good advice, thank you.

Oh, Im not an expert on banking things (Just very risk averse). I didn't mean it to be advice as such, but maybe something worth checking out if its the kind of thing that might worry you

I really like the idea of having an emergency fund somewhere else, or alternatively having something I can sell at short notice like art or farm machinery. I haven't been thinking in that space for a while, having a mortgage all this time has turned me into a bit of a financial zombie. So it is a great idea that I'm going to spend some energy looking into.

Correct. All obligations loan. No consent required.

I used to do loans for KB. They were utterly painful then and are still utterly painful from what broker friends tell me. However just grab a few quotes and make sure they're massively on the high side. Banks no doubt running scared with escalating building costs and concerns around potentially structural work. Builders having to write material escalation clauses into new build contracts now.

From memory on the banking dashboard KB were massively exposed to residential housing compared to other lenders.

Thanks. They've tended towards being a bit conservative in the past but I tried to push my local mortgage manager on this this time, and she wouldn't budge at all which caught me by surprise.

Yes, my broker mates tell me the same thing at the moment... there's no slack, banks are cherry picking customers again, battering down the hatches. KB are the toughest to get deals approved at the moment.

Read my lips - the interest rates cannot and will not go up , no matter what , much as I wish they would.

I can't see how they can go up. Despite banks saying they expect them to start rising in 2022. Is it all for show, and to warning people borrowing not to borrow too much? Every year of the last 5 years, they seem to say that interest rates will be going back up in the next year, but they have only dropped. I can see then dropping more, and it wasn't long ago when they said they would go negative. Aren't banks now ready for negative rates?

When Mr Orr can no longer buy any more bonds, they will go up. He has no control against overseas forces.

When he runs out of bonds there will be a new trick to keep the debt wheels spinning.

Never has been and not going to be a problem, as OZ banks oversee by RBNZ all knew and 'very prudent' about it. So, Kiwis BAU.. it's never been a good time to buy with assurances for longer lower OCR and hinted signal from PM about 4% annual increase. Remember, DTI issue always being rejected from 2013. Do you really think that this govt & RBNZ have the gut to introduce it? - It will be a catastrophe for NZ sole F.I.RE Economic.

I thought banks were already using debt to income ratios to make sure they were lending conservatively. My fear is that if there is a crash, the tax payer, including all those renters who aren't home owners, will be bailing it out.

Yes, they will all be bailing it out. But, it needs to happen sooner rather than later or the effect will just become more amplified.

I believe quite honestly house prices will rise. (along with everything else) NZ is quite literally one of the best
places to live in at the moment, and everyone wants to be here.
With the lack of supply and all the kiwis coming home, it can only go up. Wait till the borders open! I fortunately have my own place, but cant see my kids ever leaving!

Sorry, but this is typical NZ small country thinking ('we're world beaters, and everyone wants to live here') - it reminds me of the '100% pure NZ narrative' (i.e. bollocks). Once COVID is under control and borders open up, I think you'll see the opposite. Young people heading abroad to travel / experience big cities / further their career / earn enough money to [maybe] return to NZ with enough $ to live a good life.

The prospects for youth who want to establish themselves in NZ based on NZ salaries / job prospects have never looked worse...

Yip - having lived overseas a reasonable time, it amuses me how much kiwis think other countries admire us. We've got a weird ego/self importance thing going on. Sure NZ has some nice things going for it, but when you look at things like mental health and suicide stats, you actually realise that it can't be that great a place to live. If it was - men wouldn't be killing themselves here at such an alarming rate.

Agree. That kind of talk usually comes from people who have never lived outside of New Zealand. I have lived in other countries for a number of years and have citizenship elsewhere. I have my own home here finally, but I'm honestly not sure how permanent I want it to be. It's far more difficult to find a real sense of community here.

Ditto. I can retire comfortably in NZ but dont have enough capital to relocate for retirement as I expect to live past 90. God I miss Switzerland.

Loved Switzerland each time I've been there. And always amazed me the pride people took in their houses and surrounds. Neat and tidy. Highly industrious. (perhaps you only see the good things when you're traveling...)

I agree Dezo but most people already here cannot see that. So many people banging on how much better it is overseas, yet they are still living here. The government had better get the immigration criteria right before they reopen the boarders or else every man and his dog will be coming in.

Doesn't NZ have one of the highest rates of its own population living overseas? Aren't there a million or more kiwis overseas?

So no we don't actually like living here that much because on world standards a high proportion of those born here actually chose to leave.

Interest - do you have any stats on that?

Alot of people of Asian descent agree with dezo too

Let the inflation begin.......

This housing Ponzi is becoming a serious threat to the stability of the entire NZ financial system.
Isn't financial stability part of the remit of the RBNZ ? It is high time for Orr to shift his arse for a change, and start doing something about it. Banning interest-only loans, tightening LVR requirements for specuvestors, and slowly re-adjusting the current nonsensical ultra-loose monetary settings would be a good start.

Problem is that it has become the economy. Destroy the housing ponzi and you destroy the NZ economy.

It may be a serious threat to FHB and Investors but not the Financial sector. Orr's job is to protect the banks, expect record profit announcements from the banks.

This unbelievable credit creation bubble is going to end in tears.

Wahoo! Just what the RBNZ hope for! They must be so pleased.

There is no hope or future for most first home buyers and their only hope is to leave NZ.

12 month previous LVR removal (rather than reduction of it), is a clear indication as how govt & RBNZ valued the investors within NZ economic systems. The OZ banks just play by the book, as being written by the authorities.
Imagine if when the regulatory gambling or alcohol participants... being abolished just for 12 months, you shall see the industry will go rampant to get new customer addicted first.. then put back the regulatory measures. It's too late by then.. the carnage will be long lasting, before the slow recovery phase. Felt sorry for Kiwis.

This is what I keep saying. Wait til interest rates go up. Then you'll see a correction.

I find this DTI measurement misleading. The last time the DTI was at 3 we had 18% Mortgage rates !
There needs to be another calculation that takes the DTI ratio and mortgage interest rates both into consideration.