Average price paid by first home buyers dropped to lowest level in almost a year in July

The average price paid by first home buyers in July was at its lowest level in almost a year.

Based on the latest Reserve Bank (RBNZ) data, interest.co.nz estimates first home buyers paid an average $679,701 to get into a home of their own in July, the lowest it has been in any month since August last year.

Not only are first home buyers being cautious on price, it appears that fewer of them are actually committing to a sale.

According to the RBNZ, 2732, new mortgages were approved to first home buyers in July, down 9.5% compared to July last year.

That was exactly a third of all the mortgages approved to all borrower types for the purpose of buying a residential property, so although first home buyers may be pulling their horns in slightly, they remain a critical part of the housing market.

The average size of the mortgages approved to first home buyers in July was $578,331.

Almost exactly half (49.2%) of those mortgages were low equity loans, where the borrower has less than a 20% deposit to put towards the cost of the home, resulting in a mortgage for more than 80% of the purchase price.

Low equity mortgage approvals to first home buyers have grown spectacularly over the last few years and have almost trebled since July 2022. The chart below shows the monthly trend.

As well as borrowing more than someone with a 20% deposit, low equity borrowers also face substantially higher repayments because of the extra fees banks usually load into low equity loans.