Hopeful first home buyers faced a mix of good and bad news in April, with house prices at the bottom end of the market declining in every region of the country, while a steep rise in interest rates made mortgage payments the most unaffordable they have been in the 18-year history of interest.co.nz's Home Loan Affordability Report.
The Real Estate Institute of New Zealand's national lower quartile selling price dropped to $640,000 in April from $661,000 in March, and has now declined by $30,000 since it peaked at $670,000 in November last year.
April's lower quartile price was lower compared to March in every region of New Zealand, with the decline now spreading to regions such as Canterbury, Waikato and Nelson/Marlborough, which up until last month were continuing to post rising lower quartile prices.
The biggest decline has been in Otago where the lower quartile price was $505,000 in April, down $75,000 compared to its peak of $580,000 in October last year.
That was followed by Auckland, where the lower quartile price was $900,000 in April, down $66,000 compared to its peak in November last year.
Other regions where April's lower quartile prices were down significantly from their recent peaks were Northland -$60,000, Bay of Plenty -$47,000, Hawke's Bay -$40,000, Taranaki -$45,000, Manawatu/Whanganui -$60,870 and Nelson/Marlborough -$30,000.
On their own these price falls would be good news for hopeful first home buyers because it would mean they would need to save less for a deposit and borrow less for a mortgage.
The amount needed for a 20% deposit on a home purchased at the national lower quartile price peaked at $134,000 in November last year and had declined to $128,000 in April, a saving of $6000.
The amount of debt buyers would need to take on for an 80% mortgage declined from $536,000 to $512,000 over the same period.
Unfortunately those savings have been eclipsed by very sharp rises in mortgage interest rates, which have pushed up mortgage payments to levels that would likely be unaffordable for people on average wages.
The average of the two year fixed mortgage rates charged by the major banks increased to 4.96% in April from 4.41% in March, and has almost doubled since it hit a record low of 2.52% in May last year.
That means the mortgage payments on a home purchased at the national lower quartile price with an 80% mortgage would have increased from around $611 a week in March to $631 in April, even though the amount borrowed would have been $24,000 lower in April.
In the 12 months from April last year to April this year, the mortgage payments on a home purchased at the national lower quartile price with an 80% mortgage would have increased from $432 a week to $631 a week, up by $199 a week or 46%.
The Home Loan Affordability Report also tracks median pay rates for couples aged 25 to 29. This suggests the after-tax pay for such a couple both working full time would have increased $35 a week over the 12 months to April this year. Meanwhile, mortgage payments on a home purchased at the national lower quartile price with an 80% mortgage would have increased by $199 a week over the same period.
So what the housing market has given to first home buyers in the form of lower prices, which result in smaller deposits and smaller mortgages, it is taking away in higher mortgage payments.
First home buyers appear unlikely to get any relief from that trend any time soon. That's because it is the rate at which interest rates are increasing rather than the amount they are increasing to that is unusual.
The last time two year fixed mortgage interest rates were at their current level was September 2015, and they were above current levels for the entire period from January 2002 when interest.co.nz began compiling the figures, to September 2015, reaching as high as 9.64% in 2008.
So by historic standards, current interest rates are still relatively moderate.
The tables below show the main affordability measures with 10% and 20% deposits, in all main urban areas in the country.
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