Big jump in the percentage of first home buyers taking out low equity loans

Property / analysis

Almost 40% of first home buyers in August had a low equity loan

26th Sep 24, 11:26am by Greg Ninness

There has been a substantial increase in the percentage of first home buyers taking out low equity mortgages to purchase their home with less than a 20% deposit.

The latest figures from the Reserve Bank show that the percentage of mortgages approved for first home buyers that were low equity loans has increased for six consecutive months, from 29.7% in February this year to 38.4% in August.

The only time in the last 10 years that the percentage of low equity loans to first home buyers has been higher than it was last month, was for a brief three month period from May to July 2020, which was during the period when the Reserve Bank had completely removed LVR lending restrictions as part of its Covid stimulation package.

The latest figures suggest banks have sharpened their lending risk appetites over the last six months.

However, while more first first home buyers may be getting into their own homes with lower deposits, the amount they are borrowing remains relatively stable.

The average size of the low equity mortgages approved to first home buyers in August was $619,048, barely changed from $619,876 in August last year.

The average size of low equity mortgages approved to first home buyers peaked at $684,976 in May 2022.

Lending to first home buyers with a regular mortgage and deposit of at least 20% has followed a similar pattern.

The average size of regular mortgages approved to first home buyers with at least a 20% deposit was $510,939 in August this year, down from $518,496 in August last year and well down from the peak of $568,753 in December 2021.

Interest.co.nz estimates the average price paid by all first home buyers was $657,532 in August this year, only slightly down from $661,304 in August last year but well down from the peak of $717,724 in April 2022.

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36 Comments

by Simon | 26th Sep 24, 11:39am 1727307573

Banks think we have bottomed.

by bw | 26th Sep 24, 12:37pm 1727311069

That would be the same banks that correctly assessed the risks and approved mortgages to the Du Val Group?

https://www.nbr.co.nz/property/mortgage-lenders-close-up-shop-on-du-val…

by Toye | 26th Sep 24, 12:38pm 1727311104

Oh and don't they have a great record of forecasting things correctly.

Reforecast? Never!

by Advisor | 26th Sep 24, 11:41am 1727307678

Not all bad news - average price for FHBs around mid-600s is a step in the right direction.

by J.C. | 26th Sep 24, 12:04pm 1727309055

Still quite a bit of coin for the dregs of the housing stock. Squeezing what you can from the laggards to the Ponzi is the game now. Sure, those already in the charade can trade between themselves, but I think new entrants based on traditional demogs will become a scarcity. What's next, scam buyer syndicates from South Asia? Don't be surprised.

Everyone's hoping China can pull out a Hail Mary - the busloads of Chinese turning up willing to pay a king's ransom for a piece of Aotearoa suburbia. I think they're dreaming.

by youngdumbandfullofit | 26th Sep 24, 12:58pm 1727312293

Because of the huge delay in people accessing their first home they have much higher incomes than even the affordability matrix on here uses. A couple 25-29? I am 32 and maybe only 30% of my social network has a home (very middle-class spread of people with some upper-middle), so you have a huge pent up demand of people entering higher income jobs, who have saved for longer, there's plenty of people who have been looking for years at the first opportunity a bank will give them to buy.

Many still avoid the heck out of townhouses, but some still single people are opting for units where they can get in on a solo income.

by M0ralHazard | 26th Sep 24, 2:44pm 1727318693

I think the median age for buying your first home is something like 35 in NZ, so that tracks

by interesting1234 | 26th Sep 24, 3:39pm 1727321987

Interesting spread. The question then becomes, compounding interest, or mortgage payments, and depending on how much you value security. If you're banking on decent capital gains then maybe the house works better, but those savings can grow exponentially in the right places and prices are likely to continue downwards for a while.

by powerupkiwi | 26th Sep 24, 7:41pm 1727336502

Yeah the tap of capital flight from China is definitely closing.

by Crazy Horse | 26th Sep 24, 12:26pm 1727310384

The average household income in Auckland is $161,886 in 2024....

So to be anything of a good build quality, adequate size and a reasonable, safe area for a young family, you've got to be looking at, at least $1.2 mil for anything decent.

So ... with a $250,000 deposit (try saving that without any help from the bank of mom & dad) you are left with a mortgage of $950,000 - which currently is at 18 months fixed rate of 5.99% p.a. is $2,821 a fortnight.

Take off 28% tax from the gross income - left with $116,557 or $4,482 a fortnight

So that's 63% of the household's net pay ie left with $1,661 a fortnight ..... or $830 a week

And this is currently in a market where vendors are not "meeting the market" and "hanging on" to 2021 valuations.

And everyone wonders why the CBD of Auckland is dead .....they have either left for overseas or haven't got any disposable income to go out !

ALL FOR THE BENEFIT OF A SMALL GROUP OF CURRENT PROPERTY INVESTORS who are already charging above market rents for incomes, while others get the accommodation supplement to bring their rents up, for that shitty, damp box in South Auckland.

Make your own deductions with the above ...but no wonder NZ is screwed ! while the banksters are now pushing low equity loans.

CAVEAT EMPTOR FHB's !!!

by Zwifter | 26th Sep 24, 12:44pm 1727311455

I think pretty much all your numbers are wrong but in any case FHB shouldn't be looking at $1.2M homes first up, that's a second or even a third home. Still with weekly rents here now at $750 a week for a 3 bedroom house, when you could buy that house in the $800's, you are still better of buying not renting.

by Crazy Horse | 26th Sep 24, 12:54pm 1727312077

Please Zwifter can you comment on where the numbers are incorrect - perhaps the tax rate and WFF rebates otherwise ???

While would you put your young family next to a gang house ?

And we wonder why NZ's overall standard of living is decreasing .....

by 1689 Baptist | 26th Sep 24, 1:00pm 1727312412

I was about to post a reply saying you were way off with the average household income in Auckland being 161k . But then I looked it up. That is really high compared to the rest of the country and probably offsets the higher housing cost here. I was surprised.

I still have no idea how retirees, beneficiaries, and single parent nurses and teachers live in this city though.

by Chaosinflesh | 26th Sep 24, 2:34pm 1727318061

That's part of why we left NZ. We mapped everywhere in NZ we could afford to service a mortgage at 2x our lower income (my teacher wife's) against job opportunities - and there was a single town teachers can afford to live in - Taumarunui. I loved it (grew up on central plateau), my wife hated it, and so we left the country. There were other aspects related to her career as well (TEC being full of people pushing mandatory further tertiary training on behalf of the polytechs - she had qual + 8 years experience + taken 2 schools through compliance, but 'must be retrained for registration renewal'); but her after tax income doubled simply by jumping the ditch.

I'm surprised there are any teachers left in NZ at all (apart from the older cohort who haven't rented for years).

by HouseMouse | 26th Sep 24, 5:47pm 1727329653

According to JimboJones and Pa1nter most people are not any better off financially in Aus

You aren’t possibly saying that assertion is a load of rubbish are you?

by Chaosinflesh | 26th Sep 24, 6:37pm 1727332656

There are offsets, and our experience is but one of, what, 40,000 this year alone? But we are spending approx. $800/week less than we were in NZ on essentials. In fact, the only items we've observed as more expensive than NZ are childcare and booze - but we rarely drink, and I work from home.

There was a stuff story a couple months ago about a family returning - quite honestly, my wife and I read it and both agreed they were simply weak. But stuff has vested interests in running such stories - scaremongering to support the property market, imo.

by HouseMouse | 26th Sep 24, 5:44pm 1727329473

Well that’s average household income, pushed higher by those in the top 10-15%.

Median is a better measure, I think that’s about 120-130k?

by youngdumbandfullofit | 26th Sep 24, 1:08pm 1727312908

Is Beach Haven/Birkdale/Bayview a gang area? That's where all my FHB friends are buying, and the prices range from 750-950 for standalone 3 bedders. All 25min bus ride to CBD.

I mean sure... Rougher than Takapuna... But hardly a place you'd be scared to walk around. Or if you are maybe you've lived a very sheltered life.

The whole fascination with South Auckland is strange though. It's huge, and heaps of it is fine. Avoid certain sections of Clover Park/Otara sure, but I never in my years living in Manukau/Papatoetoe/Māngere East ever had a problem.

I find West much rougher, but maybe it's what you grow up accustomed with and the West style of roughness is just different...

by J.C. | 26th Sep 24, 1:17pm 1727313475

Parts of Beach Haven are nice. Solid middle class. Established tradies, entrepreneurs, higher level bureaucrats. Sea views if that's important to you. Parts of Birkdale have incidences of gang violence and meth activity. Still low probability you'd get caught in the crossfire as an innocent bystander.

by JimboJones | 26th Sep 24, 1:19pm 1727313571

Agree, you can get an ok house in an ok area reasonably central for $750k - $950k. We have lived in a supposedly bad suburb for 17 years never had the slightest problem, just got to pick the right part of the suburb (which is bigger than many NZ cities).

In saying that, our first home is probably worth over a mil these days, mainly due to size of land.

by Eschaton | 27th Sep 24, 10:45am 1727390706

South Akl, yep, seems to be a lot of racism, stereo-typing, myths and outdated perceptions. Lots of opportunity in the areas you mention because of that, massive airport presinct/ jobs, close to Manukau and Auckland CBD (unlike dury, flatbush etc), flat land, plently of affordable standalones, hard working people, a few bad streets and people but that's unavoidable in many places accross Auckland now.

by ghytresd | 27th Sep 24, 4:24pm 1727411098

that's a second or even a third home.

Ah the property "ladder" trope reinforcing the extortion of FHBs just wanting something liveable for years to come, after having to uplift their lives across multiple rentals at landlords whim.

by Toye | 26th Sep 24, 12:37pm 1727311045

by Retired-Poppy | 26th Sep 24, 1:30pm 1727314249

More FHB's getting in the door with lower deposits highlights competition driven lending desperation on behalf of banks. Yesterday it was reported that FHB share of the mortgage market is falling despite falling house prices and interest rates.

Time has highlighted the falsehood 1000s of immigrants flooding in would save the market as demand for new lending remains weak along with confidence by borrowing up large ones obligations will be inflated away. Once upon a time Chinese viewed our housing as dirt cheap, but that's all changed now. Dwelling and related costs remain over the top.

by Zachary Smith | 26th Sep 24, 2:25pm 1727317513

Browns Bay three bedroom house on a full section, just a few minutes walk from shops and the beach, sold for 808K today. More than 500k below CV. There could be bargains out there.

by Zwifter | 26th Sep 24, 2:40pm 1727318435

More likely its really old or it has serious issues.

by Retired-Poppy | 26th Sep 24, 2:56pm 1727319412

More likely its really old or it has serious issues.

How dare there be genuine bargains out there. It's a TRAVESTY!

by rastus1 | 26th Sep 24, 3:16pm 1727320576

still too soon for bargains RP. :)

by Crazy Horse | 26th Sep 24, 3:09pm 1727320191

Still no answer to my question above Zwifter ....... (crickets) .....

by 26@Main | 26th Sep 24, 3:47pm 1727322437

30 Bayview Road Browns Bay - attention renovators.

by HouseMouse | 26th Sep 24, 5:48pm 1727329708

I thought you were a property permabull

by Zachary Smith | 26th Sep 24, 6:32pm 1727332350

I would interpret my comment as bullish.

by Made_Man | 26th Sep 24, 3:46pm 1727322372

There are certainly some deals now in Wellington and Lower Hutt. A property I looked at in Lower Hutt (Nothing seriously wrong with it other than a crappy(ish) layout, was valued at a million in 2021. Listed for around $700k a few months ago and just ended up selling for under $540k. There's a property on our street that works out to just 2.8 DTI on our current salary, very tempting, although I feel like there is more pain to come...

by rastus1 | 26th Sep 24, 3:49pm 1727322575

They may look like deals now, however this is just the market returning to the norm.

by NZGecko | 26th Sep 24, 6:42pm 1727332942

Yes the property crash is just 1/2 way down the slope.

The epic ones take 6x year to bottom......20x Years as in the Japanese crash:

Then the Japanese still are far below the rampant fomo valuations of 1991.......33 years later.

Residential Property Prices for Japan (QJPN628BIS) | FRED | St. Louis Fed (stlouisfed.org)

When will NZ see the 2021 peaks again?- late 2030s?

Previous NZ 2015 to 2018 prices coming back, to be the norm again in 2026/2028.

by noponies | 26th Sep 24, 8:25pm 1727339132

Those average mortgages are eye watering. Sod trying to pay that and have any cash spare. I have a mortgage half that size and its still tight.