More than half the $1.68 billion approved for first home buyer mortgages in May was for low equity loans

First home buyer housing market activity appeared to be flat in May, according to the latest mortgage data from the Reserve Bank (RBNZ).

This shows 2875 mortgages were approved to first home buyers in May, just 17 more than 2858 in April, and 20 fewer than 2895 in May last year.

While recent mortgage approvals for first home buyers remain flat, their numbers are down by 14.1% compared to their peak of 3347 in March 2021.

The average size of mortgages approved to first home buyers in May was $584,348, with the amount being borrowed having been relatively stable. Small monthly movements have remained within a fairly tight range of $578,000 to $599,000 since October last year.

Similarly, the prices first home buyers are paying for a home also appear to be relatively stable.

Interest.co.nz estimates the average price paid by first home buyers was $688,000 in May, with that also fluctuating in a fairly narrow range of $682,000 to $703,000 since the start of this year.

Low equity mortgages rising

However, the proportion of first home buyers taking out low equity mortgages, where they have less than a 20% deposit, is back on the rise.

Low equity mortgages made up a record 51.8% of all mortgage approvals to first home buyers in January this year, then dropped back to 45.3% in March and rose to 48.0% in May.

The total value of mortgages approved to first home buyers in May was $1.68 billion, of which $882 million (52.5%) was in low equity loans.

So although overall first home buyer activity levels appear fairly flat, they are not shy when it comes to taking on large amounts of debt. And banks are not shy about lending it to them.