Housing market turned slightly in first home buyers' favour in April but how long will it last?

Getting into a home of their own became slightly easier for first home buyers in April, as falling house prices outpaced increases in mortgage interest rates.

Mortgage rates continued to increase in April, with the average of the two-year fixed rates offered by the major banks rising to 5.18% in April from 5.05% in March.

However, the effect of that on mortgage payments was more than negated by a drop in house prices.

According to the Real Estate Institute of New Zealand (REINZ), the national lower quartile selling price dropped to $592,000 in April from $610,000 in March.

The combined effect of those two movements meant the mortgage payments on a home purchased at the national lower quartile price with a 10% deposit declined to $767 per week in April from $779 a week in March. That's a saving of $12 a week.

Although the difference is small, it is at least heading in the right direction. But perhaps more importantly, it marks a reversal of the trend over the first three months of this year.

Between January and March, the REINZ's lower quartile price increased to $610,000 from $583,000, while the average two year fixed rate increased to 5.05% from 4.74%.

Those two factors pushed up the mortgage payments on a lower quartile-priced home to $779 a week in March from $720 a week in January. That's an increase of $59 a week in the first quarter of the year.

So the $12 a week decrease in April would have been a small but welcome relief.

Unfortunately, one month's figures do not make a trend.

Most economic forecasters are expecting interest rates to keep rising this year. So for affordability levels to improve for first home buyers there would need to be a significant decline in prices at the bottom end of the market.

While the housing market is decidedly soft heading into winter, significant falls in lower quartile prices are infrequent, because they tend to be much more resilient than prices in the middle of the market (median prices).

However, given the economic uncertainties facing the world, there's at least an outside chance of further improvements in affordability as the year progresses.

The tables below show the main measures of affordability for homes purchased at the current lower quartile price with either a 10% or 20% deposit. Note the explanations for the affordability calculations, at the bottom of each table.

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