Low equity mortgages helping to prop up first home buyer activity, Reserve Bank data suggests

There has been almost no change in activity by first home buyers in the last 12 months, according to the latest Reserve Bank data, but the volume of them taking on low equity loans is rising.

This shows 2538 mortgages were approved to first home buyers in August, almost unchanged from the 2549 approved in August last year.

Similarly, there has been hardly any change in the total value of the mortgages approved to first home buyers, which increased marginally from $1.470 billion in August last year to $1.475b in August this year.

There was a very modest increase in the average value of the mortgages approved to first home buyers over that period, from $577,000 in August last year, to $581,000 in August this year.

Not surprisingly, the amount first home buyers are paying for a home has not changed from a year ago.

Interest.co.nz estimates the average price they paid to move into a home of their own was $681,000 in August this year, unchanged from August last year.

Low equity loan volumes rising

What has changed over the last year is the willingness of first home buyers to take on low equity mortgages with less than a 20% deposit, which has been matched by the willingness, if not down right enthusiasm of the banks to provide that type of mortgage.

 In August, just over half (50.5%) of the mortgages approved to first home buyers were low equity loans, up from 44.7% in August last year.

The number of first home buyers taking out low equity mortgages has grown substantially since early 2024 when they accounted for less than a third of their mortgage approvals.

This appears to have maintained the number of first home buyers getting into a home of their own, while also propping up bank lending levels in a soft housing market.

The average size of the low equity mortgages approved to first home buyers in August was $636,000, compared to $525,000 for those with at least a 20% deposit.

First home buyers accounted for almost 36% of the mortgages approved for the purposes of buying a residential property in August (this excludes mortgage top-ups and borrowers changing banks), which suggests they are currently accounting for around a third of total housing sales.