Falling house prices at the bottom of the market saw affordability continue to improve for first home buyers in July even as mortgage interest rates continued to rise.
According to the Real Estate Institute of New Zealand, the national lower quartile selling price was $575,000 in July, down from $585,000 in June and $600,000 in May. That puts the national lower quartile price at its lowest point since January last year, with it now down $95,000 compared to its November 2021 peak.
The lower quartile price is the price point at which 25% of sales are below and 75% are above, representing the most affordable end of the housing market.
However while prices have been declining, mortgage interest rates have been rising, maintaining upward pressure on affordability levels.
The average two year fixed mortgage rate has increased for eight consecutive months, rising to 5.30% in July from 4.49% in November last year, keeping upward pressure on mortgage payment levels even as purchase prices have declined.
However, the latest drop in the lower quartile price has been enough to see the mortgage payments on a lower quartile-priced home decline slightly, even as the underlying mortgage rate has increased.
Interest.co.nz estimates the mortgage payments on homes bought at the lower quartile price with a 10% deposit have declined to $754 a week in July from $779 in March this year, saving the typical first home buyer $25 a week.
In Auckland, the only region where housing is still considered technically unaffordable for first home buyers with a 10% deposit, the lower quartile price falls have been even greater, down to $755,000 in July from $800,000 in April, a drop of $45,000 (5.6%) in three months.
That has seen the mortgage payments on a lower quartile-priced home purchased with a 10% deposit in Auckland decline by $46 a week since April, in spite of rising mortgage rates.
So what first home buyers are losing from rising interest rates, they are currently making up for in lower purchase prices.
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