The number of first home buyers taking out low equity mortgages to get into a home of their own hit a record high in July.
The latest Reserve Bank (RBNZ) figures show that 1336 low equity mortgages were approved* to first home buyers in July, which was up by 47% compared to July last year and was also the highest ever recorded in a month in the RBNZ data series which goes back to 2014.
A low equity mortgage is one where the borrower has less than a 20% deposit to put towards the purchase of a property, and they are usually significantly more expensive for the borrower because of the additional fees the banks charge for them.
The RBNZ figures also show that low equity mortgages made up 44% of all the mortgages approved for first home buyers in July, which was also the highest ever figure in the same data series going back to 2014.
That helped propel the average estimated price first home buyers paid for a home in July to an almost three year high.
Interest.co.nz estimates that the average price first home buyers paid for a home in July was $685,600, the highest it has been since October 2022.
That's still down by $32,100 (-4.5%) from the record estimated price paid by first home buyers which was $717,700 in April 2022.
The average size of the mortgages approved to first home buyers with at least a 20% deposit in July was $533,800, while the average low equity mortgage approved for first home buyers in July was $637,800.
Both are staggeringly large amounts of debt for first home buyers to be taking on, and the figures are particularly worrying in regard to low equity borrowers, because they are likely to have less wriggle room to restructure their mortgage should they strike financial difficulties, particularly in the first few years after buying their home, when they are unlikely to have built up much equity in their property, especially in the currently soft using market.
*Note: The Reserve Bank's monthly mortgage approval figures may be significantly higher than mortgages actually put in place. You can read more about this here.
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