First home buyer activity is flat but record numbers are taking out low equity mortgages to get into homes of their own

First home buyer borrowing activity appears to have flattened out, according to the latest Reserve Bank figures.

According to the Reserve Bank, 2743* mortgages were approved to first home buyers in September. That's up 11% compared to September last year, and up 23% compared to September 2023.

However, the number of mortgages being approved to first home buyers has been relatively flat since March this year, and September's figure was just slightly below the monthly average of 2784 since March.

This suggests first home buyer activity in the housing market remains elevated but is no longer increasing.

First home buyers are also remaining cautious about the prices they are prepared to pay.

Interest.co.nz estimates the average price paid by first home buyers declined for the second month in a row to $676,000 in September. That's down $42,000 (-5.8%) compared to the April 2022 peak of $718,000.

However, one figure that continues to rise is the percentage of first home buyers taking out low equity mortgages to purchase their home with less than a 20% deposit.

This set a new record in September, with 46% of first home buyer mortgage approvals being low equity loans, the highest percentage in the Reserve Bank data series that dates back to 2014.

September was the first time low equity mortgage approvals have been above 45% of total approvals to first home buyers. If low equity approvals keep increasing at current rates, they will pass the 50% mark some time in the peak summer selling season, at which point low equity mortgages will become the norm for first home buyers.

The average amount of the low equity loans approved to first home buyers in September was $639,000, while the average mortgage approved to first home buyers with at least a 20% deposit was $517,000.

The Reserve Bank's figures do not provide a regional breakdown. However, interest.co.nz's Home Loan Affordability Report shows the main measures of mortgage affordability for first home buyers in all main urban districts throughout the country.

*Note: The actual number of mortgages taken out by first home buyers each month will be less than the number of mortgages approved, because many prospective borrowers will obtain mortgage approvals from several banks but will only take up one of those offers.