Roost Mortgage Brokers Home Loan Affordability report shows slight improvement in February; 1st home buyers dipping into KiwiSaver

Roost Mortgage Brokers Home Loan Affordability report shows slight improvement in February; 1st home buyers dipping into KiwiSaver

By Bernard Hickey

Home loan affordability improved again slightly in February as the national median house price was stable, interest rates remained at record lows and incomes nudged up a little.

The Roost Home Loan Affordability monthly reports show affordability for young working couples remains near its best levels in seven years, although affordability for home buyers in central Auckland, Wellington and Christchurch remains difficult.

“First home buyers are much more active in the market as they use their KiwiSaver nest eggs for deposits and force the banks to compete hard for their business with record low interest rates,” said Colleen Dennehy, a spokeswoman for Roost Mortgage Brokers, which sponsors the Roost Home Loan Affordability report from Interest.co.nz.

After three years in the scheme KiwiSavers who want to buy a first home can withdraw contributions made by themselves and their employers for a deposit. They cannot withdraw the government’s kick-start or tax credits contributed by the government.  Eligible first home borrowers can also receive a Housing NZ subsidy of up to NZ$5,000 each when they withdraw their KiwiSaver funds.

Banks have held their floating and fixed mortgage rates at record lows over the last month despite some signs of rising wholesale interest rates. Some bank economists have suggested floating borrowers fix their mortgages to avoid any increases over the next two years, but others are saying rates are unlikely to rise fast or far, making the fixed vs floating decision a tougher one.

Bank economists have forecast the Reserve Bank will hold rates until December 2012, although calmer global financial markets and signs of growth have pushed up longer term wholesale rates this month.

Affordability improved slightly nationally in February, with incomes up a touch, while the median house price for all of New Zealand was unchanged at NZ$355,000. This reduced the proportion of after tax income needed to service an 80% mortgage on a median house to 51.8% in February from 51.9% in January, the Roost Home Loan Affordability report shows

Household affordability for first home buyers improved to 20.9% of income from 21.0% the previous month and is around its best levels since late 2004. First home buyer household affordability is measured by calculating the proportion of after tax pay needed by two young median income earners to service an 80% home loan on a first quartile priced house.

Affordability worsened somewhat in Northland, Auckland Central, North Shore, South Auckland, Wellington City, Christchurch, Queenstown, Timaru and Dunedin, where house prices rose. It improved in most other areas where median prices were flat to slightly lower. See the main report for links to regional reports.

The Roost Home Loan Affordability report measures affordability nationally and regionally for individual income earners and households, taking into account median house prices, interest rates and incomes in their regions and cities.

Affordability has generally been improving since December 2009 as house prices have flattened out and interest rates have fallen, although there has been some deterioration in recent months as house prices have firmed again.

More than 60% of home owners are now on floating mortgages and most new borrowers are choosing to float, given advertised floating rates at around 5.75% are cheaper than average longer term fixed rates at around 5.8%. The Home Loan Affordability reports use the floating rate.

Affordability for households with more than one income improved slightly in February because of slightly higher incomes. This measure of a ‘standard typical household' found the proportion of after tax income needed to service the mortgage on a median house fell to 33.9% from 34.0% in February.

This measure assumes one median male income; half a median female income aged 30-35 and a 5-year-old child that receives Working-for-Families benefits. Any level over 40% is considered unaffordable for a household, whereas any level closer to 30% has coincided with increased buyer demand in the past.

The first home buyer household measure assumes a first home buyer household includes a median male income and a median female income aged 25-29 with no children. Any level over 30% is considered unaffordable in the longer term for such a household, while any level closer to 20% is seen as attractive and coinciding with strong demand.

Regional home loan affordability comparison:      
mortgage payment as a % of weekly take-home pay      
 
Feb-12
Jan-12
Feb-11
Feb-10
Feb-09
Feb-08
New Zealand
51.8%
51.9%
54.7%
63.6%
54.1%
80.4%
Northland
50.5%
49.1%
56.1%
61.7%
54.6%
73.6%
- Whangarei
42.7%
44.3%
46.6%
50.7%
46.9%
77.4%
Auckland
64.7%
65.3%
68.9%
78.1%
65.1%
95.0%
- Central
71.4%
66.0%
68.3%
83.0%
67.9%
94.4%
- North Shore
69.9%
69.3%
74.4%
85.2%
71.3%
107.1%
- South
69.1%
68.4%
70.5%
79.9%
68.8%
92.6%
- West
55.0%
56.0%
60.3%
70.8%
57.0%
83.9%
Waikato/BOP
48.9%
47.4%
51.6%
62.2%
55.1%
83.8%
- Hamilton
49.2%
49.2%
53.1%
62.5%
55.5%
88.5%
- Tauranga
56.4%
58.1%
56.8%
70.6%
61.0%
90.0%
- Rotorua
35.7%
36.1%
41.9%
47.7%
44.6%
65.7%
Hawkes Bay
47.4%
45.5%
50.6%
58.7%
48.7%
71.9%
- Napier
48.0%
49.4%
55.3%
67.7%
56.3%
81.0%
- Hastings
46.6%
41.3%
51.4%
56.3%
46.1%
67.9%
- Gisborne
41.2%
40.8%
45.7%
70.1%
50.2%
76.5%
Manawatu/Wanganui
35.5%
36.8%
40.0%
46.0%
40.8%
58.5%
- Palmerston North
37.5%
39.7%
43.0%
48.8%
41.8%
62.4%
- Wanganui
29.5%
28.8%
38.4%
41.9%
37.1%
47.0%
Taranaki
42.5%
47.6%
47.9%
56.3%
46.1%
68.9%
- New Plymouth
50.0%
51.8%
53.4%
69.3%
48.6%
82.7%
Wellington region
52.4%
52.1%
59.1%
65.8%
56.9%
83.0%
- City
59.3%
57.7%
64.6%
74.5%
61.1%
88.8%
- Hutt Valley
45.2%
46.7%
51.2%
51.1%
52.2%
73.0%
- Porirua
53.3%
55.5%
63.1%
74.1%
55.7%
80.8%
- Kapiti Coast
51.4%
54.1%
53.2%
65.0%
59.1%
78.5%
Nelson/Marlborough
52.7%
52.1%
56.9%
66.1%
58.1%
91.9%
- Nelson
52.2%
51.0%
58.5%
70.6%
57.4%
89.4%
Canterbury/Westland
50.0%
49.2%
47.1%
57.4%
49.0%
79.2%
- Christchurch
54.8%
53.7%
55.7%
65.5%
53.1%
84.8%
- Timaru
44.0%
40.3%
38.8%
44.7%
37.3%
57.8%
Central Otago Lakes
62.5%
69.1%
74.3%
86.2%
75.1%
132.6%
- Queenstown
81.9%
79.2%
97.0%
102.9%
89.2%
142.0%
Otago
38.0%
35.8%
40.1%
44.0%
39.4%
59.6%
- Dunedin
44.0%
41.8%
44.8%
50.0%
44.3%
64.8%
Southland
28.3%
29.6%
35.1%
36.9%
31.7%
52.6%
- Invercargill
30.7%
32.0%
39.4%
39.8%
34.1%
56.8%

Full regional reports are available below:
- New Zealand (159kb .pdf)
- Northland (159kb .pdf)
    - Whangarei (159kb .pdf)
- Auckland region (159kb .pdf)
    - Auckland Central (159kb .pdf)
    - Auckland North Shore (159kb .pdf)
    - Auckland South(159kb .pdf)
    - Auckland West(159kb .pdf)
- Waikato and Bay of Plenty (159kb .pdf)
    - Hamilton (159kb .pdf)
    - Tauranga (159kb .pdf)
    - Rotorua (159kb .pdf)
- Hawkes Bay and Gisborne (159kb .pdf)
    - Napier (159kb .pdf)
    - Hastings (159kb .pdf)
    - Gisborne (159kb .pdf)
- Taranaki (159kb .pdf)
    - New Plymouth (159kb .pdf)
- Manawatu and Wanganui(159kb .pdf)
    - Palmerston North(159kb .pdf)
    - Wanganui(159kb .pdf)
- Wellington region (159kb .pdf)
    - Wellington City (159kb .pdf)
    - Wellington Hutt Valley(159kb .pdf)
    - Porirua (159kb .pdf)
    - Kapiti Coast (159kb .pdf)
- Nelson and Marlborough (159kb .pdf)
    - Nelson (159kb .pdf)
- Canterbury (156kb .pdf)
    - Christchurch (156kb .pdf)
    - Timaru (156kb .pdf)
- Central Otago Lakes (159kb .pdf)
    - Queenstown (159kb .pdf)
- Otago (159kb .pdf)
    - Dunedin (159kb .pdf)
- Southland (159kb .pdf)
    - Invercargill (159kb .pdf)

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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9 Comments

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Never been so cheap for those under-40s to buy a house. A cheap nice starter house at $350k with 95% mortgage = under $1000 fortnightly payments.  Pity the 39 & unders are so addicted to ipods, ipads, $20k weddings (after living together for 8 yrs), o/seas holidays, 2 nice cars   -  doesn't leave much for a deposit/repayments.
Really this is inter-generational theft -  us over 40s are getting low rates on our TDs - propping up those gen x/y/z-ers with their cheap loan rates.!
Boy, we had it Much tougher -   borrowing our 1st mortgage at 20.5% - no house price growth for 7 years,  poor job prospects in the provinces as Labour destroyed the rural economy....
 

Hi MB
http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10807228
Glenfield and Henderson popular with FHBs
Re: Term Deposits- I always thought they should be used defensively by people who are filthy rich and can live on the 5% return ie Trevor the Lotto millionaire. I recommend you invest in a business or even a rental property ;)

It is now 5000 to $6000 cheaper to service a 300k home loan today compared to 2008.

Annually

kia ora  MBelt  !     the low interest rates are absolutely significant for us mortgage slaves , and financially  far outweigh other negatives in the economy

Cheap and cheerful, it's definitely time to buy.  Come on NZL, lets go out there to the open homes this weekend and find some bargains!!

If you have a reasonable job, plan to stay in an area for a few years, then I can't understand why you wouldn't buy a dwelling
. . Can you refuse to be part of the economy? Do you refuse to work cos u disagree with wage rates? Stop eating as food pricgies high? @

This is drivel...where the % has dropped the jobs have gone...and do you recall the recent rubbish about recovery in the usa...
"US house prices continued to fall in January, but at a slower pace than in the previous month, a closely-watched survey has suggested.
The Case Shiller housing index, which is compiled by rating agency Standard & Poor's, was down 3.8% from a year ago.
Sixteen of the 19 cities covered by the survey showed price falls.
Separately, figures suggested consumer confidence in the US dipped in March after rising sharply in the previous month."
http://www.bbc.co.uk/news/business-17528069
 
Now you know why Bernanke is getting ready to boost Obama with more printing.

The government interving with first home buyers deposit is another example of governments shooting taxpers in the foot!! More buyers will push up house prices requiring even bigger mortgages. In a couple of years you'll find it harder for first home buyers to join the property ladder, government will come up with another scheme to help and so and so..... The bubble may burst in the mean time as things are.
Same problem is occuring with interest rates held down by the central bank, distoring the signals that would other wise have interest rates much higher, telling borrowers that lenders think lending is currently risky. Think about it, the world is borrowing so much currently that governments are required to print to fuel get access to affordable cash!!! That cannot end well!! http://j.mp/yE0rV4